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Velocity instability in the USA: a monetary or real phenomenon?


  • Parantap Basu
  • Pami Dua


Using a vector autoregressive framework, this paper examines the role of real and monetary factors in explaining velocity instability in the sample periods 1973:1-1993:2 and 1979:4-1993:2. The VAR model includes money growth variability, velocity, the interest rate and real output. On the basis of variance decompositions for both sample periods, there is little support for Friedman's monetary uncertainty hypothesis. Movements in velocity are governed more by interest rate and real output changes.

Suggested Citation

  • Parantap Basu & Pami Dua, 1996. "Velocity instability in the USA: a monetary or real phenomenon?," Applied Economics Letters, Taylor & Francis Journals, vol. 3(9), pages 581-585.
  • Handle: RePEc:taf:apeclt:v:3:y:1996:i:9:p:581-585 DOI: 10.1080/135048596356005

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    References listed on IDEAS

    1. Hamori, Shigeyuki, 1992. "Test of C-CAPM for Japan: 1980-1988," Economics Letters, Elsevier, vol. 38(1), pages 67-72, January.
    2. Hamori, Shigeyuki, 1993. "Test of the international equity integration of Japan," Economics Letters, Elsevier, vol. 42(1), pages 71-76.
    3. Hamori, Shigeyuki, 1992. "On the structural stability of preference parameters obtained from Japanese financial market data," Economics Letters, Elsevier, vol. 40(4), pages 459-464, December.
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