Abstract
In this paper we provide an update regarding the effects of money growth variability on real economic activity in the United States using monthly data and the new CFS Divisia monetary aggregates, extending the work in Serletis and Shahmoradi (Macroecon Dyn 10:652–666 2006) and Serletis and Rahman (Open Econ Rev 20:607–630 2009, Macroecon Dyn 17:1638–1658 2013). We present evidence that increased uncertainty about the growth rate of the CFS Divisia M1, M2M, and M4+ monetary aggregates is associated with a lower average growth rate of real economic activity in the United States. We also argue that optimal monetary aggregation, as suggested over thirty years ago by Barnett (J Money Credit Bank 14:687–710 1982), will further improve our understanding of how money affects the economy.
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We would like to thank the Editor, George Tavlas, for comments that greatly improved the paper.
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Serletis, A., Rahman, S. On the Output Effects of Monetary Variability. Open Econ Rev 26, 225–236 (2015). https://doi.org/10.1007/s11079-014-9325-9
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DOI: https://doi.org/10.1007/s11079-014-9325-9