SFB 303 Discussion Paper No. B - 320

Author: Neumann, Manfred J. M., and Katrin Wesche
Title: Divergent Trends in the Velocity of Money
Abstract: This paper discusses alternative explanations of trends in the velocity of different money aggregates put forward in the literature. We make a fresh approach towards explaining changes in velocity trends by introducing a hypothesis on the distribution of money holdings. This leads to a number of new hypotheses about the impact of different kinds of structural change on the velocity of money, such as permanent immigration, rising unemployment or the growing importance of the services sector. We present some evidence for Germany that suggests that trend changes in the structure of the economy may have induced a negative velocity trend.
Keywords: Velocity of money
JEL-Classification-Number: E41
Creation-Date: July 1995
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