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Institutional Change and the Velocity of Money: A Century of Evidence

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  • Bordo, Michael D
  • Jonung, Lars
  • Siklos, Pierre L

Abstract

The authors study common features in the income velocity of money, income, and interest rates for Canada, the United States, the United Kingdom, Sweden, and Norway using annual data from 1870. The recently developed and refined techniques of testing for cointegration are employed. The evidence suggests there is a unique long-run relationship in velocity but not in income and interest rates. Moreover, the authors find that only a model which includes institutional change proxies is properly specified. They argue that the evidence is best interpreted in the context of common historical developments in the respective countries' financial systems. Copyright 1997 by Oxford University Press.

Suggested Citation

  • Bordo, Michael D & Jonung, Lars & Siklos, Pierre L, 1997. "Institutional Change and the Velocity of Money: A Century of Evidence," Economic Inquiry, Western Economic Association International, vol. 35(4), pages 710-724, October.
  • Handle: RePEc:oup:ecinqu:v:35:y:1997:i:4:p:710-24
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    Cited by:

    1. Anderson, Richard G. & Bordo, Michael & Duca, John V., 2017. "Money and velocity during financial crises: From the great depression to the great recession," Journal of Economic Dynamics and Control, Elsevier, vol. 81(C), pages 32-49.
    2. Javier Gómez P., 1998. "La Demanda Por Dinero En Colombia," BORRADORES DE ECONOMIA 002969, BANCO DE LA REPÚBLICA.
    3. Aaron Mehrotra, 2008. "Demand for Money in Transition: Evidence from China’s Disinflation," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 14(1), pages 36-47, February.
    4. Omer, Muhammad, 2009. "Stability of money demand function in Pakistan," MPRA Paper 35306, University Library of Munich, Germany.
    5. Martha Misas A. & Enrique López E. & Luis Fernando Melo V., 1999. "La inflación desde una perspectiva monetaria: un modelo P* para Colombia," Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 0(35), pages 5-53, Junio.
    6. Alfred A. Haug, 2002. "Canadian Money Demand Functions Cointegration¨CRank Stability," Working Papers 2002_10, York University, Department of Economics.
    7. Rockoff, Hugh & White, Eugene N., 2012. "Monetary Regimes and Policy on a Global Scale: The Oeuvre of Michael D. Bordo," MPRA Paper 49672, University Library of Munich, Germany, revised May 2013.
    8. Korhonen, Tapio, 2001. "Finnish monetary and foreign exchange policy and the changeover to the euro," Research Discussion Papers 25/2001, Bank of Finland.
    9. Nidia Ruth Reyes & José Eduardo Gómez González, 2001. "Estimacion de la demanda transaccional de dinero en Colombia," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 54, pages 115-131, Enero Jun.
    10. Mark Holmes, 2000. "The Velocity of Circulation: Some new evidence on international integration," International Review of Applied Economics, Taylor & Francis Journals, vol. 14(4), pages 449-459.
    11. Baomin Dong & Jiong Gong, 2014. "Special Issue: Issues in Asia. Guest Editor: Laixun Zhao," Review of Development Economics, Wiley Blackwell, vol. 18(2), pages 203-217, May.

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