TY  - JOUR
AU  - Bordo,Michael D.
AU  - Jonung,Lars
TI  - The Stochastic Properties of Velocity:  A New Interpretation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2255
PY  - 1988
Y2  - September 1988
UR  - http://www.nber.org/papers/w2255
L1  - http://www.nber.org/papers/w2255.pdf
N1  - Author contact info:
Michael D. Bordo
Department of Economics
Rutgers University
New Jersey Hall
75 Hamilton Street
New Brunswick, NJ 08901
Tel: 732/822-7152
Fax: 732/932-7416
E-Mail: bordo@econ.rutgers.edu
AB  - A number of recent studies have concluded that velocity for the United States for the past century displays the characteristics of a random walk without drift. In this study, we confirm this result for four other countries for which we have over a century of data -- Canada, the United Kingdom, Sweden and Norway. One implication of a random walk is that past changes in velocity cannot be used to predict future changes. However, this does not mean that past changes in variables that economic theory deems important determinants of velocity cannot be used to predict future changes. In this study we find that past changes in the traditional determinants of velocity - permanent income and interest rates, as well as a number of institutional variables, can be used to predict future changes in velocity.
ER  -