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Abstract

Most macroeconomic models, such as the IS-LM, assume equilibrium in money markets. Since money demand is an inverse function of velocity, an inaccurate estimate of velocity will lead to errors in calculating the monetary and general equilibria. This note suggests a way to gauge the potential error in estimating velocity. The algorithm arises from the quantity equation of exchange, which one may prefer to an ad hoc model of velocity.



Item Type: MPRA Paper -

Original Title: An algorithm for estimating the volatility of the velocity of money-

Language: English-

Keywords: monetary policy, simulations, forecasting in transitional economies, mathematical statistics in economics -

Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E47 - Forecasting and Simulation: Models and ApplicationsE - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary PolicyE - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies-





Author: Alikhanov, Murat

Source: https://mpra.ub.uni-muenchen.de/49313/



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