New evidence on income and the velocity of money
AbstractTime series and cross-country empirical results suggest that cash holding as a percentage of income rises, or alternatively that velocity falls, as income increases. Numerous cross-sectional findings at many points in time, in several countries conclude oppositely. It is argued here that the former findings suffer from omitted variable bias by ignoring socio-demographic variables affecting the demand for cash balances. When one incorporates such demand shifters into the analysis the time series and cross-country are seen as consistent with the critically reexamined result that velocity increases with income.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 19899.
Date of creation: Jan 1978
Date of revision:
Money demand; velocity of money; time series; cross-country; cross-sectional;
Other versions of this item:
- E0 - Macroeconomics and Monetary Economics - - General
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
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- Graves, Philip E., 1980.
"The velocity of money: evidence for the U.K. 1911-1966,"
19900, University Library of Munich, Germany.
- Graves, Philip E, 1980. "The Velocity of Money: Evidence for the U.K., 1911-1966," Economic Inquiry, Western Economic Association International, vol. 18(4), pages 631-39, October.
- Graves, Philip E., 1979.
"Relative Risk Aversion: Increasing or Decreasing?,"
Journal of Financial and Quantitative Analysis,
Cambridge University Press, vol. 14(02), pages 205-214, June.
- James Boughton, 1992. "International comparisons of money demand," Open Economies Review, Springer, vol. 3(3), pages 323-343, October.
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