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The Global Velocity Curve 1952-1982

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  • Michael D. Bordo
  • Lars Jonung

Abstract

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.

Suggested Citation

  • Michael D. Bordo & Lars Jonung, 1986. "The Global Velocity Curve 1952-1982," NBER Working Papers 2074, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2074
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    References listed on IDEAS

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    1. Melitz, Jacques & Correa, Hector, 1970. "International Differences in Income Velocity," The Review of Economics and Statistics, MIT Press, vol. 52(1), pages 12-17, February.
    2. Milton Friedman, 1959. "The Demand for Money: Some Theoretical and Empirical Results," NBER Chapters, in: The Demand for Money: Some Theoretical and Empirical Results, pages 1-29, National Bureau of Economic Research, Inc.
    3. Kravis, Irving B & Heston, Alan W & Summers, Robert, 1978. "Real GDP per Capita for More Than One Hundred Countries," Economic Journal, Royal Economic Society, vol. 88(350), pages 215-242, June.
    4. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72(6), pages 584-584.
    5. Kaufman, George G. & Latta, Cynthia M., 1966. "The Demand For Money: Preliminary Evidence from Industrial Countries," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 1(3), pages 75-89, September.
    6. Lars Jonung, 1979. "The Long-Run Demand for Money — A Wicksellian Approach," Palgrave Macmillan Books, in: Steinar Strøm & Björn Thalberg (ed.), The Theoretical Contributions of Knut Wicksell, pages 88-102, Palgrave Macmillan.
    7. Erin E. Jucker-Fleetwood, 1958. "The Key Role Of The Velocity Of Circulation Of Money And Credit," Oxford Economic Papers, Oxford University Press, vol. 10(3), pages 290-315.
    8. Driscoll, Michael J & Lahiri, Ashok, K, 1983. "Income-Velocity of Money in Agricultural Developing Economies," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 393-401, August.
    9. Jonung, Lars, 1978. " The Long-run Demand for Money-A Wicksellian Approach," Scandinavian Journal of Economics, Wiley Blackwell, vol. 80(2), pages 216-230.
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    Cited by:

    1. Gancho Todorov Ganchev, 2010. "On the Utility of Money," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 32-60.

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