The Global Velocity Curve 1952-1982
, Lars Jonung
NBER Working Paper No. 2074 (Also Reprint No. r1067)
This paper provides evidence and an explanation for an empirical regularity in the income velocity of money. Based on a cross country comparison in the post World War II period of 84 countries arrayed from very low to very high per capita income, velocity displays a U shaped pattern. This observed cross country pattern is very similar to one observed in an earlier study by the authors for a number of advanced countries for over a century. The U-shaped pattern of velocity behavior is explained by an approach which stresses the influence of institutional factors. On a secular basis the downward trend in velocity is due to a process of monetization while the upward trend is explained by financial development. On a cross country basis industrialized countries with we1 1 developed financial systems should generally display a rising 'trend in velocity while poor countries at an earlier stage of economics growth should as a rule have falling trends. Velocity in economies "in between" should exhibit a fairly flat pattern with a weak positive or negative trend.
Document Object Identifier (DOI): 10.3386/w2074
Published: Bordo, Michael D. and Lars Jonung (eds.) The Long-run Behavior of the Velocity of Circulation: The International Evidence. New York: Cambridge University Press, 1987.
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