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Monetization and the behavior of velocity in Sweden, 1871-1913

Jonung, Lars LU (1983) In Explorations in Economic History 20(4). p.418-439
Abstract
The income velocity of money declined sharply in Sweden between the 1870's and the outbreak of World War I. This decline is explained by a monetization process. An account of this process is given focusing on (a) the growth of commercial banking, (b) changes in wage contracts and in labor markets, and (c) changes in exchange arrangements in the markets for goods. A number of proxy measures of the spreading use of money are presented and included in regressions on velocity. The influence of the monetization variables is compared to the effects of the standard explanatory variables in money demand studies, that is, of real income and interest rates. The econometric results support the view that monetization variables significantly... (More)
The income velocity of money declined sharply in Sweden between the 1870's and the outbreak of World War I. This decline is explained by a monetization process. An account of this process is given focusing on (a) the growth of commercial banking, (b) changes in wage contracts and in labor markets, and (c) changes in exchange arrangements in the markets for goods. A number of proxy measures of the spreading use of money are presented and included in regressions on velocity. The influence of the monetization variables is compared to the effects of the standard explanatory variables in money demand studies, that is, of real income and interest rates. The econometric results support the view that monetization variables significantly contributed to the fall in velocity. These results question the luxury-good hypothesis of money, suggesting that the standard approach of including real income as an explanatory variable in money demand studies covering long spans of time runs the risk of ignoring important determinants of the secular behavior of velocity.

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published
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in
Explorations in Economic History
volume
20
issue
4
pages
22 pages
publisher
Elsevier
external identifiers
  • scopus:48749149126
ISSN
0014-4983
DOI
10.1016/0014-4983(83)90028-1
language
English
LU publication?
yes
id
a990f256-351b-4cf4-9e32-fb517818a105
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https://www.scopus.com/inward/record.uri?eid=2-s2.0-48749149126&doi=10.1016%2f0014-4983%2883%2990028-1&partnerID=40&md5=02a7f6821dcd3445b411e00c776537e3
date added to LUP
2017-02-23 10:55:34
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2017-03-08 15:59:57
@article{a990f256-351b-4cf4-9e32-fb517818a105,
  abstract     = {The income velocity of money declined sharply in Sweden between the 1870's and the outbreak of World War I. This decline is explained by a monetization process. An account of this process is given focusing on (a) the growth of commercial banking, (b) changes in wage contracts and in labor markets, and (c) changes in exchange arrangements in the markets for goods. A number of proxy measures of the spreading use of money are presented and included in regressions on velocity. The influence of the monetization variables is compared to the effects of the standard explanatory variables in money demand studies, that is, of real income and interest rates. The econometric results support the view that monetization variables significantly contributed to the fall in velocity. These results question the luxury-good hypothesis of money, suggesting that the standard approach of including real income as an explanatory variable in money demand studies covering long spans of time runs the risk of ignoring important determinants of the secular behavior of velocity.<br/><br/>},
  author       = {Jonung, Lars},
  issn         = {0014-4983},
  language     = {eng},
  number       = {4},
  pages        = {418--439},
  publisher    = {Elsevier},
  series       = {Explorations in Economic History},
  title        = {Monetization and the behavior of velocity in Sweden, 1871-1913},
  url          = {http://dx.doi.org/10.1016/0014-4983(83)90028-1},
  volume       = {20},
  year         = {1983},
}