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Money, Velocity, and the Stock Market

Author

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  • Karl Pinno

    (University of British Columbia)

  • Apostolos Serletis

    (University of Calgary)

Abstract

This paper provides a study of the relationship between money growth variability, velocity, and the stock market, using recent advances in financial econometrics. We estimate a trivariate VARMA, GARCH-in-Mean, BEKK model to quantify the effects of financial market and money supply instability. We investigate the robustness of the results to different definitions of money using monthly Divisia indices for the United States from the Center for Financial Stability (CFS). Empirical evidence supports significance of financial market and money supply volatility, and we conclude that Friedman’s money supply volatility hypothesis is alive and well.

Suggested Citation

  • Karl Pinno & Apostolos Serletis, 2016. "Money, Velocity, and the Stock Market," Open Economies Review, Springer, vol. 27(4), pages 671-695, September.
    • Handle: RePEc:kap:openec:v:27:y:2016:i:4:d:10.1007_s11079-016-9400-5
    DOI: 10.1007/s11079-016-9400-5
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    2. Anderson, Richard G. & Duca, John V. & Fleissig, Adrian R. & Jones, Barry E., 2019. "New monetary services (Divisia) indexes for the post-war U.S," Journal of Financial Stability, Elsevier, vol. 42(C), pages 3-17.

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    More about this item

    Keywords

    Multivariate GARCH; Variability of money growth; Divisia monetary aggregates;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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