The Global Velocity Curve 1952-1982

54 Pages Posted: 15 Jul 2004 Last revised: 6 Sep 2010

See all articles by Michael D. Bordo

Michael D. Bordo

Rutgers University, New Brunswick - Department of Economics; National Bureau of Economic Research (NBER)

Lars Jonung

Lund University - Dept. of Economics

Date Written: November 1986

Abstract

This paper provides evidence and an explanation for an empirical regularity in the income velocity of money. Based on a cross country comparison in the post World War II period of 84 countries arrayed from very low to very high per capita income, velocity displays a U shaped pattern. This observed cross country pattern is very similar to one observed in an earlier study by the authors for a number of advanced countries for over a century. The U-shaped pattern of velocity behavior is explained by an approach which stresses the influence of institutional factors. On a secular basis the downward trend in velocity is due to a process of monetization while the upward trend is explained by financial development. On a cross country basis industrialized countries with we1 1 developed financial systems should generally display a rising 'trend in velocity while poor countries at an earlier stage of economics growth should as a rule have falling trends. Velocity in economies "in between" should exhibit a fairly flat pattern with a weak positive or negative trend.

Suggested Citation

Bordo, Michael D. and Jonung, Lars, The Global Velocity Curve 1952-1982 (November 1986). NBER Working Paper No. w2074. Available at SSRN: https://ssrn.com/abstract=344852

Michael D. Bordo (Contact Author)

Rutgers University, New Brunswick - Department of Economics ( email )

New Brunswick, NJ
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Lars Jonung

Lund University - Dept. of Economics ( email )

Box 7080
Lund, 22007
Sweden

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