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Real or nominal shock – which one does more to destabilize developing economies? The case of money velocity in Kazakhstan

Author

Listed:
  • Murat Alikhanov
  • Leon Taylor

    (KIMEP University, Almaty, Kazakhstan)

Abstract
Volatility in money velocity destabilizes spending and output, generating business cycles. This note develops a gauge of this volatility, based on the quantity equation of exchange. In contrast to ad hoc regression, the gauge measures the impacts on volatility of the three determinants of velocity – money supply, output, and the price level. The algorithm allows covariances among these variables. An application to a fast-growing transition economy, Kazakhstan, finds that at the margin, price shocks affect volatility more than do real shocks, by several orders of magnitude. An oil exporter, Kazakhstan may be vulnerable to the gyrating price of crude.

Suggested Citation

  • Murat Alikhanov & Leon Taylor, 2015. "Real or nominal shock – which one does more to destabilize developing economies? The case of money velocity in Kazakhstan," Bulgarian Economic Papers bep-2015-06, Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski - Bulgaria // Center for Economic Theories and Policies at Sofia University St Kliment Ohridski, revised May 2015.
    • Handle: RePEc:sko:wpaper:bep-2015-06
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    File URL: https://www.uni-sofia.bg/index.php/eng/content/download/140408/1028118/file/BEP-2015-06.pdf
    File Function: First version, 2015
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    Citations

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    Cited by:

    1. Elwasila Saeed Elamin Mohamed, 2020. "Velocity of Money Income and Economic Growth in Sudan: Cointegration and Error Correction Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 10(2), pages 87-98.

    More about this item

    Keywords

    real shocks; monetary shocks; monetary policy; simulations; forecasting in transitional economies;
    All these keywords.

    JEL classification:

    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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