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Money, Velocity, and the Stock Market

Author

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  • Karl Pinno

    (University of British Columbia)

  • Apostolos Serletis

    (University of Calgary)

Abstract

This paper provides a study of the relationship between money growth variability, velocity, and the stock market, using recent advances in financial econometrics. We estimate a trivariate VARMA, GARCH-in-Mean, BEKK model to quantify the effects of financial market and money supply instability. We investigate the robustness of the results to different definitions of money using monthly Divisia indices for the United States from the Center for Financial Stability (CFS). Empirical evidence supports significance of financial market and money supply volatility, and we conclude that Friedman’s money supply volatility hypothesis is alive and well.

Suggested Citation

  • Karl Pinno & Apostolos Serletis, 2016. "Money, Velocity, and the Stock Market," Open Economies Review, Springer, vol. 27(4), pages 671-695, September.
    • Handle: RePEc:kap:openec:v:27:y:2016:i:4:d:10.1007_s11079-016-9400-5
    DOI: 10.1007/s11079-016-9400-5
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    Cited by:

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    2. Md Fouad Bin Amin & Mohd Ziaur Rehman, 2022. "Asymmetric Linkages of Oil Prices, Money Supply, and TASI on Sectoral Stock Prices in Saudi Arabia: A Non-Linear ARDL Approach," SAGE Open, , vol. 12(1), pages 21582440211, January.

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    More about this item

    Keywords

    Multivariate GARCH; Variability of money growth; Divisia monetary aggregates;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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