Skip to main content Accessibility help


  • Apostolos Serletis (a1) and Sajjadur Rahman (a2)

In this paper we investigate the relationship between money growth uncertainty and the level of economic activity in the United States. We pay explicit attention to the Divisia monetary aggregates. In doing so, we use the new vintage of the data [called MSI (monetary services indices) by the St. Louis Fed], together with the simple sum monetary aggregates, over the period from 1967:1 to 2011:3. In the context of a bivariate VARMA, GARCH-in-mean, asymmetric BEKK model, we show that increased Divisia money growth volatility (irrespective of the level of aggregation and the method of calculation) is associated with a lower average growth rate of real economic activity. However, there are no effects of simple-sum money growth volatility on real economic activity, except with the Sum M1 and perhaps Sum M2M aggregates. We conclude that monetary policies that focus on the Divisia monetary aggregates and target their growth rates will contribute to higher overall economic growth.

Corresponding author
Address correspondence to: Apostolos Serletis, Department of Economics, University of Calgary, Calgary, Alberta T2N 1N4, Canada; e-mail:; URL:
Hide All
Anderson, Richard G. and Jones, Barry E. (in press) A comprehensive revision of the monetary services (Divisia) indexes for the United States. Federal Reserve Bank of St. Louis Review.
Barnett, William A. (1980) Economic monetary aggregates: An application of aggregation and index number theory. Journal of Econometrics 14, 1148.
Barnett, William A. (2011) Getting It Wrong: How Faulty Monetary Statistics Undermine the Fed, the Financial System, and the Economy. Cambridge, MA: MIT Press.
Barnett, William A. and Chauvet, Marcelle (2011) How better monetary statistics could have signaled the financial crisis. Journal of Econometrics 161, 623.
Dickey, David A. and Fuller, Wayne A. (1981) Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica 49, 10571072.
Engle, Robert F. and Kroner, Kenneth F. (1995) Multivariate simultaneous generalized ARCH. Econometric Theory 11, 122150.
Friedman, Milton (1983) Monetary variability: The United States and Japan. Journal of Money, Credit, and Banking 15, 339343.
Friedman, Milton (1984) Lessons from the 1979–1982 monetary policy experiment. American Economic Review Papers and Proceedings 74, 397400.
Grier, Kevin B., Henry, Ólan T., Olekalns, Nills, and Shields, Kalvinder (2004) The asymmetric effects of uncertainty on inflation and output growth. Journal of Applied Econometrics 19, 551565.
Hansen, Peter R. and Lunde, Asger (2005) A forecast comparison of volatility models: Does anything beat a GARCH(1,1)? Journal of Applied Econometrics 20, 873889.
Kroner, Kenneth F. and Ng, Victor K. (1998) Modeling asymmetric comovements of asset returns. Review of Financial Studies 11, 817844.
Kwiatkowski, D., Phillips, P. C. B., Schmidt, P., and Shin, Y. (1992) Testing the null hypothesis of stationarity against the alternative of a unit root. Journal of Econometrics 54, 159178.
Ljung, T. and Box, G. (1979) On a measure of lack of fit in time series models. Biometrica 66, 6672.
Serletis, Apostolos and Rahman, Sajjadur (2009) The output effects of money growth uncertainty: Evidence from a multivariate GARCH-in-mean VAR. Open Economies Review 20, 607630.
Serletis, Apostolos and Shahmoradi, Akbar (2006) Velocity and the variability of money growth: Evidence from a VARMA, GARCH-M model. Macroeconomic Dynamics 10, 652666.
Shields, Kalvinder, Olekalns, Nills, Henry, Ólan T., and Brooks, Chris (2005) Measuring the response of macroeconomic uncertainty to shocks. Review of Economics and Statistics 87, 362370.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *



Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed