Velocity Effects of Anticipated and Unanticipated Money Growth and Its Variability: Eveidence From Morocco

This paper uses the Granger-causality technique to test Friedman 's hypothesis that variability in monetcuy growth causes changes in velocity. Two models are constructed and tested. The first model uses aggregate money without distinction between the anticipated and unanticipated money growth. The second model decomposes money into its anticipated and unanticipated components. When Ml is the monetary aggregate of interest, the evidence jkmi both models supports Friedman 's hypothesis and confirms that increased volatility in money growth has caused velocity to decline. Thejindings are also consistent with the new-classical hypothesis which postulates that anticipated movements in money supply are neutral.