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The Demand for Money and Velocity in Major OECD Countries

Author

Listed:
  • Adrian Blundell-Wignall

    (OECD)

  • M. Rondoni

    (OECD)

  • Helmut Ziegelschmidt

    (OECD)

Abstract

In recent years the behaviour of the income velocity of money in major OECD economies has displayed considerable volatility for both narrow and broad monetary aggregates (Table 1). Velocity in a number of large OECD economies, for example, fell sharply in 1982. Most notably, declines in the income velocity of M1, M2 and M3 in the United States of 2.3, 4.9 and 5.9 per cent, respectively, were large by historical standards. Such movements in velocity may arise as a consequence of changes in money demand in two important ways: they may result from movements along the money demand function, as the normal implication of changes in its interest rate and inflation expectations arguments; and the money demand function itself may shift (money demand instability), leading to unpredictable changes in velocity. Velocity may also move as the mechanical result of policies by the authorities which alter the supply of money in the short run, while the private sector is able to adjust only with ...

Suggested Citation

  • Adrian Blundell-Wignall & M. Rondoni & Helmut Ziegelschmidt, 1984. "The Demand for Money and Velocity in Major OECD Countries," OECD Economics Department Working Papers 13, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:13-en
    DOI: 10.1787/808007523862
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    Cited by:

    1. Daniela Zapodeanu & Mihail Ioan Cociuba, 2010. "Linking Money Supply With The Gross Domestic Product In Romania," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(12), pages 1-50.
    2. Victor Argy & Anthony Brennan & Glenn Stevens, 1990. "Monetary Targeting: The International Experience," The Economic Record, The Economic Society of Australia, vol. 66(1), pages 37-62, March.
    3. Erwin W. Heri, 1988. "Money Demand Regressions and Monetary Targeting Theory and Stylized Evidence," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 124(II), pages 123-149, June.

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