Velocity of money and inflation dynamics Academic Article

abstract

• 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. 2009 Taylor & Francis.

authors

• Kim, Hwagyun

published proceedings

• APPLIED ECONOMICS LETTERS

author list (cited authors)

• Kim, H., & Subramanian, C.

citation count

• 2

complete list of authors

• Kim, Hwagyun||Subramanian, Chetan

publication date

• December 2009

publisher

• Taylor & Francis  Publisher

published in

• Applied Economics Letters  Journal

Digital Object Identifier (DOI)

• 10.1080/13504850701719652

start page

• 1777

end page

• 1781

volume

• 16

issue

• 18

URL

• http://dx.doi.org/10.1080/13504850701719652