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The Theory And Measurement Of Cash Payments; A Case Study Of The Netherlands

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  • Edgar L. Feige

    (University of Wisconsin-Madison)

Abstract

One of the more intractable problems in the area of monetary economics is the measurement of cash payments. Whereas the stock of currency in circulation [C] is well defined and readily measured, the transactions velocity of currency [Vc] (the average number of times currency turns over in any given period) is difficult to measure. This paper examines alternative methods for estimating the average velocity of currency and the denomination specific velocity of cash employing data for the Netherlands. Estimates of the volume of cash payments are necessary to meaningfully measure the volume of total payments [MV] in an economy and hence, the total volume of transactions [PT]. Once the volume of cash payments is known, it is possible to employ Fisher’s equation of exchange [MV=PT] as a more general conceptual and empirical alternative to Keynes’ more limited income-expenditure [Y= C+I+G] identity.

Suggested Citation

  • Edgar L. Feige, 2005. "The Theory And Measurement Of Cash Payments; A Case Study Of The Netherlands," Macroeconomics 0501025, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:0501025
    Note: Type of Document - pdf; pages: 32
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0501/0501025.pdf
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    References listed on IDEAS

    as
    1. Feige, Edgar L., 1985. "The Swedish Payments System and the Underground Economy," Working Paper Series 153, Research Institute of Industrial Economics.
    2. Edgar L. Feige, 1979. "How Big Is the Irregular Economy?," Challenge, Taylor & Francis Journals, vol. 22(5), pages 5-13, November.
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    Cited by:

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    2. Edgar L. Feige, 2000. "Taxation for the 21st century: the automated payment transaction (APT) tax," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 15(31), pages 474-511.

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    More about this item

    Keywords

    Cash payments; Velocity of currency; Equation of exchange; total transactions; underground economy.;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology

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