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

Economic Inquiry, Volume XXXV, Number 4 (October 1997)

Posted: 24 Feb 1998

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

Pierre L. Siklos

Wilfrid Laurier University - School of Business & Economics; Balsillie school of international affairs

Abstract

We study common features in the income velocity of money, income, and interest rates for Canada, the U.S., the U.K., 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, we find that only a model which includes institutional change proxies is properly specified. We argue that the evidence is best interpreted in the context of common historical developments in the respective countries' financial systems.

JEL Classification: E41, N2, O11

Suggested Citation

Bordo, Michael D. and Jonung, Lars and Siklos, Pierre L., Institutional Change and the Velocity of Money: A Century of Evidence. Economic Inquiry, Volume XXXV, Number 4 (October 1997). Available at SSRN: https://ssrn.com/abstract=61397

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

Pierre L. Siklos

Wilfrid Laurier University - School of Business & Economics ( email )

Department of Economics
75 University Avenue W.
Waterloo, Ontario N2L 3C5
Canada
519-884-0710 Ext.. 3491 (Phone)

HOME PAGE: http://pierrelsiklos.com

Balsillie school of international affairs ( email )

67 Erb Street West
Waterloo, ON N2L 6C2
Canada

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