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Money growth volatility and the demand for money in Germany: Friedman’s volatility hypothesis revisited

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  • Imke Brüggemann
  • Dieter Nautz

Abstract

Recently, the Bundesbank claimed that monetary targeting has become considerably more diffcult by the increased volatility of short-term money growth. The present paper investigates the impact of German money growth volatility on income velocity and money demand in view of Friedman's money growth volatility hypothesis. Granger-causality tests provide some evidence for a velocity-volatility linkage. However the estimation of volatility-augmented money demand functions reveals that - in contrast to Friedman's hypothesis - increased money growth volatility lowered the demand for money.
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  • Imke Brüggemann & Dieter Nautz, 1997. "Money growth volatility and the demand for money in Germany: Friedman’s volatility hypothesis revisited," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(3), pages 523-537, September.
    • Handle: RePEc:spr:weltar:v:133:y:1997:i:3:p:523-537
    DOI: 10.1007/BF02707501
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    6. Mohsen Bahmani‐Oskooee & Majid Maki Nayeri, 2018. "Policy Uncertainty and the Demand for Money in Australia: an Asymmetry Analysis," Australian Economic Papers, Wiley Blackwell, vol. 57(4), pages 456-469, December.
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    9. S. M. Woahid Murad, 2021. "Asymmetric Effects of Economic Uncertainty on Money Demand Function in Bangladesh: A Nonlinear ARDL and Cumulative Fourier Causality Approach," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 20(2), pages 1-13, September.
    10. S. M. Woahid Murad, 2021. "Asymmetric Effects of Economic Uncertainty on Money Demand Function in Bangladesh: A Nonlinear ARDL and Cumulative Fourier Causality Approach," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 20(2), pages 187-199, September.
    11. Mohsen Bahmani-Oskooee & Sahar Bahmani, 2014. "Monetary Uncertainty and Demand for Money in Korea," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(3), pages 317-324, March.
    12. Mohsen Bahmani‐Oskooee & Mehrnoosh Hasanzade, 2022. "Policy uncertainty and income distribution: Asymmetric evidence from state‐level data in the United States," Bulletin of Economic Research, Wiley Blackwell, vol. 74(1), pages 179-220, January.
    13. S. M. Woahid Murad, 2021. "Asymmetric Effects of Economic Uncertainty on Money Demand Function in Bangladesh: A Nonlinear ARDL and Cumulative Fourier Causality Approach," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 20(3), pages 201-213, December.

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    More about this item

    Keywords

    E41; E52;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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