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Instability of the Velocity of Money: A New Approach Based on the Evolutionary Spectrum

Author

Listed:
  • Artis, Michael J
  • Bladen-Hovell, Robin
  • Nachane, Dilip M

Abstract

Money demand instability has been the subject of considerable attention in the recent literature. This paper examines the stability of velocity series for the United States and for five European countries (France, Germany, Italy, the Netherlands and the United Kingdom). A distribution-free test due to Subba Rao (1981) and based on the concept of the evolutionary spectrum is used. The test does not require the assumption that distributions are Gaussian and is able to decompose (by frequency) the sources of instability. The technique reveals structural breaks of long-term significance for only broad money velocity in the United States and narrow money velocity in the United Kingdom.

Suggested Citation

  • Artis, Michael J & Bladen-Hovell, Robin & Nachane, Dilip M, 1992. "Instability of the Velocity of Money: A New Approach Based on the Evolutionary Spectrum," CEPR Discussion Papers 735, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:735
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    More about this item

    Keywords

    Evolutionary Spectrum; Frequency Domain; Instability; Money Demand; Structural Breaks; Velocity;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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