Acta Univ. Agric. Silvic. Mendelianae Brun. 2012, 60(2), 109-116 | DOI: 10.11118/actaun201260020109

Liquidity supply and money velocity co-movements in the Eurozone - Time-Frequency Domain Approach

Svatopluk Kapounek1, Jitka Poměnková2
1 Ústav financí, Mendelova univerzita v Brně, Zemědělská 1, 613 00 Brno, Česká republika
2 Ústav radioelektroniky, Vysoké učení technické v Brně, Purkyňova 118, 612 00 Brno, Česká republika

The authors focus on financial stability in the Eurozone and propose alternative indicator for macro-prudential policy implementation. Rapid growth of the shadow banking system biases increase in loans to identify financial instability. The velocity of money represented money demand in the economy. The empirical part of the paper applies wavelet analysis to identify cyclical co-movements in money velocity and liquidity supply. The authors provide recommendations for policymakers to stabilize global liquidity shocks and reduce procyclical effects by institutions which supply official liquidity in their domestic currency - central banks.

Keywords: financial stability, macro-prudential policy, credit money creation, money endogeneity, wavelet analysis
Grants and funding:

The results introduced in the paper are supported by the Czech Science Foundation via grant n. P402/11/0570 with the title "Time-frequency approach for the Czech Republic business cycle datting" and by the project CZ.1.07/2.3.00/20.0007 WICOMT of the operational program Education for competitiveness.

Received: November 30, 2011; Published: October 3, 2013  Show citation

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Kapounek, S., & Poměnková, J. (2012). Liquidity supply and money velocity co-movements in the Eurozone - Time-Frequency Domain Approach. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 60(2), 109-116. doi: 10.11118/actaun201260020109
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