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Liquidity supply and money velocity co-movements in the Eurozone - Time-Frequency Domain Approach

Author

Listed:
  • Svatopluk Kapounek

    (Ústav financí, Mendelova univerzita v Brně, Zemědělská 1, 613 00 Brno, Česká republika)

  • Jitka Poměnková

    (Ústav radioelektroniky, Vysoké učení technické v Brně, Purkyňova 118, 612 00 Brno, Česká republika)

Abstract

The authors focus on financial stability in the Eurozone and propose alternative indicator for macro-prudential policy implementation. Rapid growth of the shadow banking system biases increase in loans to identify financial instability. The velocity of money represented money demand in the economy. The empirical part of the paper applies wavelet analysis to identify cyclical co-movements in money velocity and liquidity supply. The authors provide recommendations for policymakers to stabilize global liquidity shocks and reduce procyclical effects by institutions which supply official liquidity in their domestic currency - central banks.

Suggested Citation

  • Svatopluk Kapounek & Jitka Poměnková, 2012. "Liquidity supply and money velocity co-movements in the Eurozone - Time-Frequency Domain Approach," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 60(2), pages 109-116.
    • Handle: RePEc:mup:actaun:actaun_2012060020109
    DOI: 10.11118/actaun201260020109
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    References listed on IDEAS

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    1. Bank for International Settlements, 2011. "Global liquidity - concept, measurement and policy implications," CGFS Papers, Bank for International Settlements, number 45, december.
    2. Gabriele Galati & Richhild Moessner, 2013. "Macroprudential Policy – A Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 27(5), pages 846-878, December.
    3. Rua, António, 2010. "Measuring comovement in the time-frequency space," Journal of Macroeconomics, Elsevier, vol. 32(2), pages 685-691, June.
    4. Jitka Poměnková & Svatopluk Kapounek & Roman Maršálek, 2011. "Comparison of methodological approaches to identify economic activity regularities in transition economy," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 59(7), pages 283-292.
    5. Tobias Adrian & Hyun Song Shin, 2009. "Money, Liquidity, and Monetary Policy," American Economic Review, American Economic Association, vol. 99(2), pages 600-605, May.
    6. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
    7. Hans Gersbach & Volker Hahn, 2011. "Modeling Two Macro Policy Instruments - Interest Rates and Aggregate Capital Requirements," CESifo Working Paper Series 3598, CESifo.
    8. Nao Sudo, 2011. "Accounting for the Decline in the Velocity of Money in the Japanese Economy," IMES Discussion Paper Series 11-E-16, Institute for Monetary and Economic Studies, Bank of Japan.
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