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Money velocity in an endogenous growth business cycle with credit shocks

Benk, Szilard, Gillman, Max and Kejak, Michal 2008. Money velocity in an endogenous growth business cycle with credit shocks. Journal of Money, Credit and Banking 40 (6) , pp. 1281-1293. 10.1111/j.1538-4616.2008.00157.x

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The paper sets the neoclassical monetary business cycle model within endogenous growth, adds exchange credit shocks, and finds that money and credit shocks explain much of the velocity variations. The role of the shocks varies across subperiods in an intuitive fashion. Endogenous growth is key to the construction of the money and credit shocks because these have similar effects on velocity, but opposite effects upon growth. The model matches the data's average velocity and simulates well velocity volatility. Its Cagan-like money demand means that money and credit shocks cause greater velocity variation, the higher is the nominal interest rate.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Uncontrolled Keywords: Velocity; Business cycle; Credit shocks; Endogenous growth
Publisher: Wiley-Blackwell
ISSN: 0022-2879
Last Modified: 19 Mar 2016 22:32

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