IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/49313.html
   My bibliography  Save this paper

An algorithm for estimating the volatility of the velocity of money

Author

Listed:
  • Alikhanov, Murat
  • Taylor, Leon

Abstract

Most macroeconomic models, such as the IS-LM, assume equilibrium in money markets. Since money demand is an inverse function of velocity, an inaccurate estimate of velocity will lead to errors in calculating the monetary and general equilibria. This note suggests a way to gauge the potential error in estimating velocity. The algorithm arises from the quantity equation of exchange, which one may prefer to an ad hoc model of velocity.

Suggested Citation

  • Alikhanov, Murat & Taylor, Leon, 2013. "An algorithm for estimating the volatility of the velocity of money," MPRA Paper 49313, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:49313
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/49313/1/MPRA_paper_49313.pdf
    File Function: original version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/62902/1/MPRA_paper_62902.pdf
    File Function: revised version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Yilmaz, Mesut & Oskenbayev, Yessengali & Kanat, Abdulla, 2010. "Demand For Money In Kazakhstan: 2000-2007," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 118-129, March.
    2. Thornton, Daniel L & Batten, Dallas S, 1985. "Lag-Length Selection and Tests of Granger Causality between Money and Income," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(2), pages 164-178, May.
    3. Milton Friedman, 1971. "A Theoretical Framework for Monetary Analysis," NBER Books, National Bureau of Economic Research, Inc, number frie71-1.
    4. Hall, Thomas E & Noble, Nicholas R, 1987. "Velocity and the Variability of Money Growth: Evidence from Granger-Causality Tests: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(1), pages 112-116, February.
    5. Benjamin M. Friedman, 1984. "Lessons from the 1979-1982 Monetary Policy Experiment," NBER Working Papers 1272, National Bureau of Economic Research, Inc.
    6. Yash P. Mehra, 1987. "Money growth volatility and high nominal interest rates," Economic Review, Federal Reserve Bank of Richmond, vol. 73(Nov), pages 10-19.
    7. Mascaro, Angelo & Meltzer, Allan H., 1983. "Long- and short-term interest rates in a risky world," Journal of Monetary Economics, Elsevier, vol. 12(4), pages 485-518, November.
    8. Thornton, John, 1995. "Friedman's Money Supply Volatility Hypothesis: Some International Evidence: Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 288-292, February.
    9. Brocato, Joe & Smith, Kenneth L, 1989. "Velocity and the Variability of Money Growth: Evidence from Granger-Causality Tests: Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(2), pages 258-261, May.
    10. Mr. Daniel Citrin & Ashok Lahiri, 1995. "Policy Experiences and Issues in the Baltics, Russia, and Other Countries of the Former Soviet Union," IMF Occasional Papers 1995/005, International Monetary Fund.
    11. Mehra, Yash P, 1989. "Velocity and the Variability of Money Growth: Evidence from Granger-Causality Tests: Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(2), pages 262-266, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Karl Pinno & Apostolos Serletis, 2016. "Money, Velocity, and the Stock Market," Open Economies Review, Springer, vol. 27(4), pages 671-695, September.
    2. David Cronin & Robert Kelly & Bernard Kennedy, 2011. "Money growth, uncertainty and macroeconomic activity: a multivariate GARCH analysis," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 38(2), pages 155-167, May.
    3. Oluwole Owoye, 1997. "Income velocity and the variability of money growth: evidence from less developed countries," Applied Economics, Taylor & Francis Journals, vol. 29(4), pages 485-496.
    4. Christian Bordes, 1991. "Variations de la vitesse et volatilité de la croissance monétaire : le cas français," Revue Économique, Programme National Persée, vol. 42(4), pages 733-744.
    5. Dennis McCornac, 1994. "Velocity and money growth variability: evidence from Japan," Applied Economics Letters, Taylor & Francis Journals, vol. 1(9), pages 145-147.
    6. 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.
    7. Gerald Lynch & Bradley Ewing, 1995. "Velocity and the variability of anticipated and unanticipated money growth: a cross-country comparison," Applied Economics Letters, Taylor & Francis Journals, vol. 2(11), pages 444-448.
    8. Augustine C. Arize, 1993. "Determinants of Income Velocity in the United Kingdom: Multivariate Granger Causality," The American Economist, Sage Publications, vol. 37(2), pages 40-45, October.
    9. Butkiewicz, James L. & McConnell, Margaret Mary, 1995. "The stability of the demand for money and M1 velocity: Evidence from the sectoral data," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(3), pages 233-243.
    10. James E. Payne, 1995. "Velocity and the Variability of Yields on Financial and other Assets," The American Economist, Sage Publications, vol. 39(1), pages 89-94, March.
    11. Goodhart, Charles, 1989. "The Conduct of Monetary Policy," Economic Journal, Royal Economic Society, vol. 99(396), pages 293-346, June.
    12. William A. Barnett & Yi Liu & Haiyang Xu & Mark Jensen, 1996. "The CAPM Risk Adjustment Needed for Exact Aggregation over Financial Assets," Econometrics 9602003, University Library of Munich, Germany.
    13. Mohsen Bahmani-Oskooee & Dan Xi, 2014. "Economic Uncertainty, Monetary Uncertainty, and the Demand for Money: Evidence From Asian Countries," Australian Economic Papers, Wiley Blackwell, vol. 53(1-2), pages 16-28, June.
    14. Yosuke Takeda & Atsuko Ueda, 2006. "Uncovering the Goodhart's Law: Theory and Evidence," 2006 Meeting Papers 162, Society for Economic Dynamics.
    15. Abdul Karim, Zulkefly & Jusoh, Mansor & Khalid, Norlin, 2008. "Halaju wang di Malaysia : bukti empirik [The velocity of money in Malaysia : empirical evidence]," MPRA Paper 26966, University Library of Munich, Germany, revised 19 Jun 2008.
    16. Assad L. Baunto & Christian Bordes & Samuel Maveyraud-Tricoire & Philippe Rous, 2011. "Money growth and velocity with structural breaks: Evidence from the Philippines," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00785395, HAL.
    17. Ono, Sadayuki, 2019. "Term structure dynamics in a monetary economy with learning," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 730-745.
    18. Guerello, Chiara, 2016. "The effect of investors’ confidence on monetary policy transmission mechanism," The North American Journal of Economics and Finance, Elsevier, vol. 37(C), pages 248-266.
    19. Courtenay C. Stone & Daniel L. Thornton, 1987. "Solving the 1980s' velocity puzzle: a progress report," Review, Federal Reserve Bank of St. Louis, issue Aug, pages 5-23.
    20. Kellard, Neil & Sarantis, Nicholas, 2008. "Can exchange rate volatility explain persistence in the forward premium?," Journal of Empirical Finance, Elsevier, vol. 15(4), pages 714-728, September.

    More about this item

    Keywords

    monetary policy; simulations; forecasting in transitional economies; mathematical statistics in economics;
    All these keywords.

    JEL classification:

    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:49313. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.