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The Mathematical Decomposition of the Transactions Velocity of Money

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  • Hakun Kim

Abstract

This paper is an attempt to decompose the average transactions velocity of money into two or more individual velocities. When the economy-wide velocity is expressed as a weighted average of two disaggregated velocities, this provides an equation with two unknowns. The additional equation can be created from the concept of two versions of the exchange equations; the Fisherian and Cambridge equation. The former represents the Fisherian problem, while the latter the Marshallian problem. Their integration furnishes us with the second equation to solve the system

Suggested Citation

  • Hakun Kim, 2004. "The Mathematical Decomposition of the Transactions Velocity of Money," Econometric Society 2004 Far Eastern Meetings 550, Econometric Society.
  • Handle: RePEc:ecm:feam04:550
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    File URL: http://repec.org/esFEAM04/up.10404.1079678920.pdf
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    References listed on IDEAS

    as
    1. Davidson, Paul, 1997. "Are Grains of Sand in the Wheels of International Finance Sufficient to Do the Job When Boulders Are Often Required?," Economic Journal, Royal Economic Society, vol. 107(442), pages 671-686, May.
    2. Peter N. Ireland, 1991. "Financial evolution and the long-run behavior of velocity : new evidence from U.S. regional data," Economic Review, Federal Reserve Bank of Richmond, issue Nov, pages 16-26.
    3. Paul F. McGouldrick, 1962. "A sectoral analysis of velocity," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Dec, pages 1557-1570.
    4. John A. Weinberg, 1994. "Selling Federal Reserve payment services: one price fits all?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 1-24.
    5. Thomas M. Humphrey, 1993. "The origins of velocity functions," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 1-18.
    6. Barry Eichengreen & Charles Wyplosz, 1993. "The Unstable EMS," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 51-144.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    velocity indifference curve; iso-velocity line; transactions time;

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • G2 - Financial Economics - - Financial Institutions and Services

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