Abstract
This paper uses a Granger causality test to determine if increased instability in the money supply of a country leads to a decline in velocity in that country. This research adds two new dimensions to the literature in this area. First, monetary growth is decomposed into anticipated and unanticipated components. Second, we extend the study to all of the G-7 countries. Our empirical results support the existence of a relationship between monetary instability and velocity growth in the G-7 countries.
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