Money Velocity with Interest Rate Stochastic Volatility and Exact Aggregation
The determinants of money velocity are explored under various assumptions on interest rate uncertainty in a monetary general equilibrium model. It is found that the appearance of velocity function instability can be produced by overlooking interest rate stochastic volatility. In addition, when interest rates are subject to stochastic volatility, velocity is found to follow a nonlinear stochastic process. We conclude that the variances of interest rate stochastic processes are omitted variables in many studies of velocity function behavior.
|Date of creation:||04 Mar 1998|
|Note:||Type of Document - Microsoft Word; prepared on IBM PC; pages: 22 ; figures: 2 Excel Figures Included. A revised version of this paper, with the modified title, "Stochastic Volatility in Interest Rates and Nonlinearity in Velocity," is forthcoming in a special edition of the International Journal of Systems Science|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alberto Giovannini & Pamela Labadie, 1989.
"Asset Prices and Interest Rates in Cash-In-Advance Models,"
NBER Working Papers
3109, National Bureau of Economic Research, Inc.
- Giovannini, Alberto & Labadie, Pamela, 1991. "Asset Prices and Interest Rates in Cash-in-Advance Models," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1215-1251, December.
- Giovannini, A. & Labadie, P., 1989. "Esset Prices And Interest Rates In Cash-In-Advance Models," Papers 456, Stockholm - International Economic Studies.
- James B. Bullard, 1994. "Measures of money and the quantity theory," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 19-30.
- Fisher, Douglas & Serletis, Apostolos, 1989. "Velocity and the growth of money in the United States, 1970-1985," Journal of Macroeconomics, Elsevier, vol. 11(3), pages 323-332.
- P. A. V. B. Swamy & Peter A. Tinsley, 1976.
"Linear prediction and estimation methods for regression models with stationary stochastic coefficients,"
Special Studies Papers
78, Board of Governors of the Federal Reserve System (U.S.).
- Swamy, P. A. V. B. & Tinsley, P. A., 1980. "Linear prediction and estimation methods for regression models with stationary stochastic coefficients," Journal of Econometrics, Elsevier, vol. 12(2), pages 103-142, February.
- Belongia, Michael T, 1996. "Measurement Matters: Recent Results from Monetary Economics Reexamined," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1065-1083, October.
- Pamela Labadie, 1989.
"Stochastic inflation and the equity premium,"
Discussion Paper / Institute for Empirical Macroeconomics
12, Federal Reserve Bank of Minneapolis.
- William A. Barnett & Douglas Fisher & Apostolos Serletis, 2006.
"Consumer Theory and the Demand for Money,"
World Scientific Book Chapters,
in: Money And The Economy, chapter 1, pages 3-43
World Scientific Publishing Co. Pte. Ltd..
- Barnett, William A., 1980. "Economic monetary aggregates an application of index number and aggregation theory," Journal of Econometrics, Elsevier, vol. 14(1), pages 11-48, September.
- Hall, Thomas E & Noble, Nicholas R, 1987. "Velocity and the Variability of Money Growth: Evidence from Granger-Causality Tests: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(1), pages 112-16, February.
- Barnett, William A., 1978. "The user cost of money," Economics Letters, Elsevier, vol. 1(2), pages 145-149.
- Michael T. Belongia, 1984. "Money growth variability and GNP," Review, Federal Reserve Bank of St. Louis, issue Apr, pages 23-31.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:9803004. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.