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New evidence on income and the velocity of money


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  • Graves, Philip E.


Time 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 Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19899.

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Date of creation: Jan 1978
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Handle: RePEc:pra:mprapa:19899

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Keywords: Money demand; velocity of money; time series; cross-country; cross-sectional;

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Cited by:
  1. Graves, Philip E., 1980. "The velocity of money: evidence for the U.K. 1911-1966," MPRA Paper 19900, University Library of Munich, Germany.
  2. Graves, Philip E., 1979. "Relative risk aversion: increasing or decreasing?," MPRA Paper 19909, University Library of Munich, Germany.
  3. James Boughton, 1992. "International comparisons of money demand," Open Economies Review, Springer, Springer, vol. 3(3), pages 323-343, October.


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