Does Uncertainty Impact Money Growth? A Multivariate GARCH Analysis
AbstractThe impact of uncertainty on money growth has occupied a prominent place in monetary policy analysis in recent years. Some papers examining this issue use ad hoc estimates and measure variability rather than uncertainty. We employ a multivariate GARCH model, which measures uncertainty by the conditional variance of the data series, to investigate whether macroeconomic uncertainty and monetary uncertainty Granger-cause changes in real money. We find that macroeconomic uncertainty impacts positively on US real M2 growth over a one- to two-year horizon but that monetary uncertainty does not cause changes. Instead, our results indicate that real money growth causes monetary uncertainty.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Central Bank of Ireland in its series Research Technical Papers with number 6/RT/07.
Length: 18 pages
Date of creation: Aug 2007
Date of revision:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- BAUWENS, Luc & LAURENT, Sébastien & ROMBOUTS, Jeroen VK, .
"Multivariate GARCH models: a survey,"
CORE Discussion Papers RP
-1847, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Serletis, Apostolos & Shahmoradi, Akbar, 2006. "Velocity And The Variability Of Money Growth: Evidence From A Varma, Garch-M Model," Macroeconomic Dynamics, Cambridge University Press, vol. 10(05), pages 652-666, November.
- Michael T. Belongia, 1984. "Money growth variability and GNP," Review, Federal Reserve Bank of St. Louis, issue Apr, pages 23-31.
- Carstensen, Kai, 2006. "Stock Market Downswing and the Stability of European Monetary Union Money Demand," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 395-402, October.
- Stilianos Fountas & Menelaos Karanasos & Jinki Kim, 2006. "Inflation Uncertainty, Output Growth Uncertainty and Macroeconomic Performance," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(3), pages 319-343, 06.
- Joseph Atta-Mensah, 2004. "Money Demand and Economic Uncertainty," Working Papers 04-25, Bank of Canada.
- Friedman, Milton, 1983. "Monetary Variability: United States and Japan," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(3), pages 339-43, August.
- Fountas, Stilianos & Karanasos, Menelaos, 2007.
"Inflation, output growth, and nominal and real uncertainty: Empirical evidence for the G7,"
Journal of International Money and Finance,
Elsevier, vol. 26(2), pages 229-250, March.
- Stilianos Fountas & Menelaos Karanasos, 2002. "Inflation, Output Growth, and Nominal and Real Uncertainty: Empirical Evidence for the G7," Working Papers 0064, National University of Ireland Galway, Department of Economics, revised 2002.
- Lemke, Wolfgang & Greiber, Claus, 2005. "Money demand and macroeconomic uncertainty," Discussion Paper Series 1: Economic Studies 2005,26, Deutsche Bundesbank, Research Centre.
- Choi, Woon Gyu & Oh, Seonghwan, 2003. " A Money Demand Function with Output Uncertainty, Monetary Uncertainty, and Financial Innovations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(5), pages 685-709, October.
- Friedman, Milton, 1988. "Money and the Stock Market," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 221-45, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (James Kavanagh).
If references are entirely missing, you can add them using this form.