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Velocity and interest rate variability in Italy: a further test of the Friedman hypothesis


  • Bradley Ewing


This paper examines whether interest rate variability leads to a decrease in the velocity of money in Italy. The hypothesis is tested using the Johansen cointegration technique and error-correction modelling. The empirical findings lend support to the Friedman hypothesis and help reconcile the mixed results of others regarding the hypothesis in Italy. The error-correction model results are consistent with risk-averse households holding more money, and thus reducing velocity, when faced with the uncertainty associated with interest rate variability.

Suggested Citation

  • Bradley Ewing, 1996. "Velocity and interest rate variability in Italy: a further test of the Friedman hypothesis," Applied Economics Letters, Taylor & Francis Journals, vol. 3(12), pages 775-778.
  • Handle: RePEc:taf:apeclt:v:3:y:1996:i:12:p:775-778
    DOI: 10.1080/135048596355574

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