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Money growth variability and output: evidence with credit card-augmented Divisia monetary aggregates

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  • Liu Jinan

    (Department of Economics, University of Calgary, Calgary, Alberta, T2N 1N4, Canada)

  • Serletis Apostolos

    (Department of Economics, University of Calgary, Calgary, Alberta, T2N 1N4, Canada)

Abstract

We reexamine the effects of the variability of money growth on output, raised by Mascaro and Meltzer (1983), in the era of the increasing use of alternative payments, such as credit cards. Using a bivariate VARMA, GARCH-in-Mean, asymmetric BEKK model, we find that the volatility of the credit card-augmented Divisia M4 monetary aggregate has a statistically significant negative impact on output from 2006:7 to 2019:3. However, there is no effect of the traditional Divisia M4 growth volatility on real economic activity. We conclude that the balance sheet targeting monetary policies after the financial crisis in 2007–2009 should pay more attention on the broad credit card-augmented Divisia M4 aggregate to address economic and financial stability.

Suggested Citation

  • Liu Jinan & Serletis Apostolos, 2020. "Money growth variability and output: evidence with credit card-augmented Divisia monetary aggregates," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 24(5), pages 1-11, December.
    • Handle: RePEc:bpj:sndecm:v:24:y:2020:i:5:p:11:n:7
    DOI: 10.1515/snde-2019-0106
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    References listed on IDEAS

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    1. Bollerslev, Tim & Engle, Robert F & Wooldridge, Jeffrey M, 1988. "A Capital Asset Pricing Model with Time-Varying Covariances," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 116-131, February.
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    1. Ioannis Andreadis & Athanasios D. Fragkou & Theodoros E. Karakasidis & Apostolos Serletis, 2024. "The credit card-augmented Divisia monetary aggregates: an analysis based on recurrence plots and visual boundary recurrence plots," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-26, December.

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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