Velocity of money and inflation dynamics
There have been large changes in the velocity of money which could be a potential source of inflation variability. This article investigates how the velocity of money affects inflation dynamics by estimating the Phillips curve derived from a New Keynesian model in which money is introduced via transactions technology. The resultant Phillips curve becomes a function of velocity as well as an output gap and a forward looking inflation terms, a feature for which we provide empirical support. Specifically, we adopt the GMM methodology to estimate the velocity-augmented forward looking Phillips curve using the US data between 1951 and 2005. We observe that historical inflation dynamics is consistent with the view.
Year of publication: |
2009
|
---|---|
Authors: | Kim, Hwagyun ; Subramanian, Chetan |
Published in: |
Applied Economics Letters. - Taylor & Francis Journals, ISSN 1350-4851. - Vol. 16.2009, 18, p. 1777-1781
|
Publisher: |
Taylor & Francis Journals |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Transactions Cost and Interest Rate Rules
Kim, Hwagyun, (2006)
-
Velocity of money and inflation dynamics
Kim, Hwagyun, (2009)
-
Transactions cost and interest rate rules
Kim, Hwagyun, (2006)
- More ...