Random Walk and Common Stochastic Drift in BRICS Money Velocities

Ranjan, Ravi Prakash (2014) Random Walk and Common Stochastic Drift in BRICS Money Velocities. Masters thesis, Indian Institute of Science Education and Research Kolkata.

PDF (MS dissertation of Ravi Prakash Ranjan) Ravi_Prakash_Ranjan.pdf - Submitted Version Restricted to Repository staff only Download (1MB)

Abstract

Money velocity is the cynosure of monetary policy of any economy. Understanding of money velocity fluctuations enables monetary authorities to bring stable policies to promote economic growth. In this project, an attempt has been made to understand the random walk behavior of five most emerging economies called BRICS, an acronym used for association of Brazil, Russia, India, China and South Africa. The project also investigated the possibilities of long run relationship and sharing of common stochastic trends by these velocities. The models used in this project include Runs test, ARIMA, Hurst Exponent, ADF tests and Johanson co-integration test. The results suggest that none of the velocities exhibit random walk behavior which is opposite to the results obtained by Bordo and Jonung (1987) for five developed economies. However the evidences of co-integration among the different velocities have been observed.

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