Solving the 1980s' Velocity Puzzle: A Progress Report

Stone, Courtenay C.; Thornton, Daniel L.

doi:10.20955/r.69.5-23.ktb

Cited by 19 publications

(18 citation statements)

References 20 publications

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“…The breakdown in these relationships also has been discussed as a decline in the growth rate of Ml velocity. See Stone and Thornton (1987), for example, for a survey of explanations that have been offered for this abrupt shift in what had been quite stable relationships. Tatom (1988) and others, in contrast, have disputed whether historical relationships between Ml and nominal variables were fundamentally different in the 1980s.…”

Section: Ii'mentioning

confidence: 99%

Alternative Measures of Money as Indicators of Inflation: A Survey and Some New Evidence

Belongia¹,

Chalfant²

1990

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Section: Ii'mentioning

confidence: 99%

Alternative Measures of Money as Indicators of Inflation: A Survey and Some New Evidence

Belongia¹,

Chalfant²

1990

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“…But instability of the money velocity function since the late 1970's in the U.S. has called for a reexamination of the traditional views. See, e.g., Stone and Thornton (1987). One line of research focuses on the correct measurement of money snd challenges the traditional practice of ignoring the aggregation problem in monetary economics research and policy design.…”

Section: Introductionmentioning

confidence: 99%

Capm Risk Adjustment for Exact Aggregation Over Financial Assets

1997

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Barnett originated the Divisia monetary aggregates, which in continuous time exactly track any monetary aggregator function under perfect certainty. With user costs measuring the prices of the services of components, Barnett's aggregates are based on Francois Divisia's derivation of the Divisia line integral from the first-order conditions for optimizing behavior by economic agents under perfect certainty. We derive an extended Divisia index from the first-order conditions (Euler equations) that apply under risk. Our extended Divisia index is the first extension of index number theory into the domain of decision making under risk and thereby produces a route for the extension of all index number theory to permit non-risk-neutrality. We generate simulated data from a modeled rational consumer and investigate the tracking accuracy of the extended Divisia index to the consumer's exact aggregator function.

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“…14 Fisher, and after him Keynes, suggested to distinguish between transactions arising from the sale or purchase of finished goods and services (which can be measured by GDP) and financial transactions that are not related to national income. 15 Theoretical and empirical work using a similar distinction includes Selden (1956), Spindt (1985), Cramer (1986), Stone and Thornton (1987), Niggle (1988) and Allen (1989). The UK's Central Statistical Office (1986) argued that the total value of transactions should be used in the quantity equation, while GDP was merely a subset of transactions involving final output.…”

Section: To Refer To All Transactions -Purchases Of Final Goods and Smentioning

confidence: 99%

Towards a new research programme on ‘banking and the economy’ — Implications of the Quantity Theory of Credit for the prevention and resolution of banking and debt crises

Werner

2012

International Review of Financial Analysis

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Abstract. The financial crisis has triggered a new consensus among economists that it is necessary to include a banking sector in macroeconomic models. It is also necessary for the finance and banking literature to consider how best to incorporate systemic, macroeconomic feedbacks into its modeling of financial intermediation. Thus a new research programme on the link between banking and the economy is needed. This special issue is devoted to this theme. In this paper an overview of the issues and problems in the economics and finance literature is presented, and a concrete, simple approach is identified of how to incorporate banks into a macroeconomic model that solves many of these issues. The model distinguishes between the type of credit that boosts GDP and credit that is associated with asset prices and banking crises. The model is consistent with the empirical record. Some applications are discussed, namely the prediction and prevention of banking crises, implications for fiscal policy, and a solution to the European sovereign debt crisis that stimulates growth while avoiding the corner solutions of euro exit or fiscal union.

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Solving the 1980s' Velocity Puzzle: A Progress Report

Cited by 19 publications

References 20 publications

Alternative Measures of Money as Indicators of Inflation: A Survey and Some New Evidence

Alternative Measures of Money as Indicators of Inflation: A Survey and Some New Evidence

Capm Risk Adjustment for Exact Aggregation Over Financial Assets

Towards a new research programme on ‘banking and the economy’ — Implications of the Quantity Theory of Credit for the prevention and resolution of banking and debt crises

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