Abstract
In this paper the author empirically examines the effects of both money growth and interest rate volatility measures upon the demand for real balances. The findings of this study suggest that both money growth and interest rate volatility measures are statistically insignificant. However, evidence suggests a structural shift in the demand for money in the post-1979 period. Moreover, there is a noticeable change in the speed of adjustment moving from actual to desired real balances with the adjustment coefficient in the post-1979 period increasing roughly in magnitude nine and half, times the adjustment coefficient in the pre-1979 period.
Similar content being viewed by others
References
Brocato, Joe, andKenneth L. Smith, “Velocity and the Variability of Money Growth: Evidence from Granger-Causality Tests.”Journal of Money, Credit, and Banking 21, no. 2 (May 1989): 258–261
Chow, Gregory C.. “On the Long-Run and Short-Run Demand for Money.”Journal of Political Economy 74, no. 2 (April 1966): 111–131.
Coats, Warren L.. “Modeling the Short-Run Demand for Money with Exogenous Supply.”Economic Inquiry 20 (April 1982): 222–239.
Falls, Gregory A., and Hamid Zangeneh. “The Interest Rate Volatility and the Demand for Money: The Empirical Evidence.”Quarterly Journal of Business and Economics (1989): 26–42.
Fisher, Douglas, andApostolos Seleritis. “Velocity and the Growth of Money in the United States, 1970–1985.”Journal of Macroeconomics 11, no. 3 (Summer 1989): 323–332.
Friedman, Milton. “Monetary Variability: United States and Japan.”Journal of Money, Credit, and Banking 15, no. 3 (August 1983): 339–343.
Garner, C. Alan. “Does Interest Volatility Affect Money Demand?”Economic Review Federal Reserve Bank of Kansas City (January 1986): 25–37.
Hall, Thomas E., andNicholas R. Noble. “Velocity and the Variability of Money Growth: Evidence from Granger-Causality Tests.”Journal of Money, Credit, and Banking, 19, no. 1 (February 1987): 112–116.
Hetzel, Robert L., andYash P. Mehra. “The Behavior of Money Demand in the 1980s.”Journal of Money, Credit, and Banking 21, no. 4 (November 1989): 455–463.
Judd, John P., andJohn L. Scadding. “The Search for a Stable Money Demand Function: A Survey of the Post-1973 Literature.”Journal of Economic Literature 20 (September 1982): 993–1023.
Marquis, Milton. “Interest Rate Volatility in a Partial Equilibrium Model of Household Money Demand.”Journal of Macroeconomics 11, no. 1 (Winter 1989): 67–80.
Mascaro, Angelo, andAllan H. Meltzer. “Long- and Short-Term Interest Rates in a Risky World.”Journal of Monetary Economics 12 (November 1983): 485–528
McMillin, W. Douglas. “Money Growth Volatility and the Macroeconomy.”Journal of Money, Credit, and Banking 20, no. 2 (August 1988): 319–335.
Mehra, Yash P. “Money Growth Volatility and High Nominal Interest Rates.”Economic Review (Nov/Dec. 1987): 10–19.
Mehra, Yash P.. “Velocity and the Variability of Money Growth: Evidence from Granger-Causality Tests.”Journal of Money, Credit, and Banking 21, no. 2 (May 1989): 262–266.
Payne, James E., andAnandi P. Sahu. “A Note on the Impact of Money Growth Volatility Upon Velocity.”Journal of Business and Economic Perspectives 16, no. 2 (Fall 1990): 76–78.
Slovin, Myron B., and Marie Elizabeth Sushka “Money, Interest Rates, and Risk.”Journal of Monetary Economics 12: 475–482.
Spindt, Paul A., andVefa Tarhan. “The Federal Reserve’s New Operating Procedures: A Post Mortem.”Journal of Monetary Economics 19 (1987): 107–123.
Tatom, John A. “Interest Rate Variability and Economic Performance: Further Evidence”.Journal of Political Economy 93, no. 5 (1985): 1008–1018.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Payne, J.E. Money growth and interest rate volatility and the demand for money. J Econ Finan 16, 103–114 (1992). https://doi.org/10.1007/BF02919797
Issue Date:
DOI: https://doi.org/10.1007/BF02919797