IDEAS home Printed from https://ideas.repec.org/a/col/000442/010802.html
   My bibliography  Save this article

Empirical model of the behavior of the income velocity of money in Colombia, 1982 - 2001

Author

Listed:
  • Gisela P. Zapata

Abstract

Resumen:The study of the income velocity of money is important since monetary factors play a causal role in output fluctuations. The issue of the stability of money demand is critical in assessing the monetary aggregates, M1/M3, usefulness for the formulation of monetary policy. In Colombia, the M1 income velocity of money has been very volatile whereas the M3 velocity has been pretty stable over the last 20 years. Contrary to the assumption underlying the Quantity Theory of Money, the evidence here indicates that the income velocity of money is not constant in Colombia for the 1982 - 2001 period. The statistical results show that there is a positive relationship between the Colombian inflation rate and the M1 and M3 income velocities of money. A higher rate of inflation will translate into a higher nominal interest rate. The higher the interest rates the higher the opportunity cost of holding money and so the greater the income velocity.Resumen:El estudio de la velocidad del dinero es importante porque los factores monetarios juegan un papel fundamental en las fluctuaciones del PIB. La estabilidad de la demanda de dinero es critica en la evaluación de los agregados monetarios, M1 y M3, como instrumentos de formulación de política monetaria. En Colombia en los últimos veinte anos, la velocidad del dinero de M1 ha sido muy volátil mientras que la velocidad del dinero de M3 ha sido estable. En contradicción con la hipótesis fundamental de la Teoría Cuantitativa del Dinero, la evidencia encontrada en este estudio indica que durante el período 1982 - 2001 la velocidad del dinero en Colombia no es constante Los resultados estadísticos muestran que hay una relación positiva entre la tasa de inflación Colombiana y las velocidades del dinero de M1 y M3. Un aumento de la tasa de inflación se traducirá en un aumento de la tasa de interés nominal. Entre más altas las tasas de interés, más alto es el costo de oportunidad de tener dinero en efectivo y por ende, la velocidad del dinero será más alta

Suggested Citation

  • Gisela P. Zapata, 2003. "Empirical model of the behavior of the income velocity of money in Colombia, 1982 - 2001," Revista Ecos de Economía, Universidad EAFIT, October.
    • Handle: RePEc:col:000442:010802
    as

    Download full text from publisher

    File URL: http://publicaciones.eafit.edu.co/index.php/ecos-economia/article/view/1996/2002
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Finn E. Kydland & Scott Freeman, 2000. "Monetary Aggregates and Output," American Economic Review, American Economic Association, vol. 90(5), pages 1125-1135, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Antoni, 2011. "Dynamic relation of money velocity, money volatility and inflation threshold," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 3(3), pages 245-259, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ireland, Peter N., 2003. "Endogenous money or sticky prices?," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1623-1648, November.
    2. Stefania Albanesi & V. V. Chari & Lawrence J. Christiano, 2003. "Expectation Traps and Monetary Policy," Review of Economic Studies, Oxford University Press, vol. 70(4), pages 715-741.
    3. Enzo Dia, 2004. "Monopolistic Pricing in the Banking Industry: a Dynamic Portfolio Model," Finance 0411025, University Library of Munich, Germany.
    4. Lin William Cong & Ye Li & Neng Wang, 2021. "Tokenomics: Dynamic Adoption and Valuation [The demand of liquid assets with uncertain lumpy expenditures]," The Review of Financial Studies, Society for Financial Studies, vol. 34(3), pages 1105-1155.
    5. Juan Pablo Nicolini, 2019. "Karl Brunner's Contributions to the Theory of the Money Supply," Staff Report 582, Federal Reserve Bank of Minneapolis.
    6. Martin, Antoine, 2006. "Endogenous Multiple Currencies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(1), pages 245-262, February.
    7. Eran Guse & David W. Brasfield, 2020. "A Generalized Exposition of Money Creation in the Money and Banking Course," The American Economist, Sage Publications, vol. 65(2), pages 244-263, October.
    8. Albanesi, Stefania, 2007. "Inflation and inequality," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1088-1114, May.
    9. Nao Sudo, 2011. "Accounting for the Decline in the Velocity of Money in the Japanese Economy," IMES Discussion Paper Series 11-E-16, Institute for Monetary and Economic Studies, Bank of Japan.
    10. Zhang, Cathy, 2014. "An information-based theory of international currency," Journal of International Economics, Elsevier, vol. 93(2), pages 286-301.
    11. Dia, Enzo & Menna, Lorenzo, 2016. "Productivity shocks, capital intensities, and bank interest rates," Journal of Macroeconomics, Elsevier, vol. 48(C), pages 155-171.
    12. Carpenter, Seth & Demiralp, Selva, 2012. "Money, reserves, and the transmission of monetary policy: Does the money multiplier exist?," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 59-75.
    13. Alvarez, Fernando & Lippi, Francesco, 2017. "Cash burns: An inventory model with a cash-credit choice," Journal of Monetary Economics, Elsevier, vol. 90(C), pages 99-112.
    14. Lucas, Robert E. & Nicolini, Juan Pablo, 2015. "On the stability of money demand," Journal of Monetary Economics, Elsevier, vol. 73(C), pages 48-65.
    15. Szilárd Benk & Max Gillman & Michal Kejak, 2008. "Money Velocity in an Endogenous Growth Business Cycle with Credit Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(6), pages 1281-1293, September.
    16. Dressler, Scott J. & Kersting, Erasmus K., 2015. "Excess reserves and economic activity," Journal of Economic Dynamics and Control, Elsevier, vol. 52(C), pages 17-31.
    17. Dressler, Scott J. & Kersting, Erasmus K., 2014. "Economies Of Scale In Banking, Confidence Shocks, And Business Cycles," Macroeconomic Dynamics, Cambridge University Press, vol. 18(5), pages 1069-1090, July.
    18. Özbilgin, Murat H., 2012. "Currency substitution, inflation, and welfare," Journal of Development Economics, Elsevier, vol. 99(2), pages 358-369.
    19. Peter Ireland, 2005. "EconomicDynamics Interviews Peter Ireland on Money and the Business Cycle," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 7(1), November.
    20. Hevia, Constantino & Nicolini, Juan Pablo, 2018. "Monitoring money for price stability," Journal of Economic Dynamics and Control, Elsevier, vol. 89(C), pages 50-63.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:col:000442:010802. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Valor Público EAFIT - Centro de estudios e incidencia (email available below). General contact details of provider: https://edirc.repec.org/data/deafico.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.