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Money, Velocity, and the Stock Market

Listed author(s):
  • Karl Pinno

    (University of Calgary)

  • 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.

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Paper provided by Department of Economics, University of Calgary in its series Working Papers with number 2016-33.

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Date of revision: 06 Jun 2016
Handle: RePEc:clg:wpaper:2016-33
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