Velocity Of Money Research Articles

Interest Rates, the Taylor Rule, the Quantity Equation, and the Phillips Curve

This article combines the Taylor rule, the Friedman’s Quantity Equation, and the Phillips curve to explore how deviations in the inflation rate, real GDP, money supply, money velocity, and the unemployment rate interact with the interest rate. The motivation is to understand which factors impact the interest rate and how. Applying monthly United States data from 1 January 1959 to 31 March 2022, the contribution and findings show that the deviation in the inflation rate, the deviation in the real GDP, the deviation in the money supply, the money velocity, and the deviation in the unemployment rate are positively correlated with the interest rate. Regression analysis shows that the deviation in the inflation rate and the deviation in the real GDP are statistically positive and interact with the interest rate, consistently with Taylor. The interest rate increases with the money supply and the money velocity. Multicollinearity exists between the deviation in the real GDP and the deviation in the unemployment rate. The interest rate increases with the deviation in the unemployment rate, consistently with the Phillips curve. The deviation in the inflation rate, the deviation in the money supply, the money velocity, and the deviation in the unemployment rate are good interest rate indicators. The combination explains the interest rate more realistically than the Taylor rule.

A Review of Central Bank Digital Currencies

This is a review paper on the exploratory research done by various central banks and international organisations on CBDCs and the framework to be followed for implementing these CBDCs so that the monetary system of a specific country remains unaffected. CBDCs and cryptocurrency in general as we know have become quite popular and are the talking point for many research scholars, economists and investment analysts. While many believe cryptocurrencies to have no intrinsic value, the value of the underlying technology i.e blockchain is something that can be argued upon. CBDCs remove the major cons of cryptocurrency by providing stability to the volatile cryptocurrency market and by acting as a legal tender thereby gaining the trust of retail public. Many governments believe that the introduction of CBDCs into the economy could simplify the payment’s structure thereby increasing the velocity of money leading to higher GDP growth. But one possibility that shatters this glass of optimistic views is the possibility of disintermediation of banks which could adversely affect the credit creation capacity of the country and disintegrate the entire monetary policy formation mechanism. Therefore, though the concept of digital currencies may excite many people, its adoption in an economy should be considered only after thorough research and pilot programs conducted by the central banks.

Evaluating Risks of Hyperinflation Post COVID-19 Pandemic

The COVID-19 pandemic represented a logical Catch 22 scenario in the world of financial economics. The pandemic saw a sudden and unanticipated plunge in Money Velocity, Consumer Confidence, Employment, and Industrial Output. At the same time, due to fiscal and monetary stimulus measures in the form of quantitative easing and stimulus checks, the US saw an unanticipated rise in its Money Stock. With new waves of the virus and long-lasting labor shortages, a possible surplus liquidity scenario might arise. The United States faces a potentially high inflation rate scenario in such a case. This study draws insights from similar historical precedents and aims to model inflation as a function of macroeconomic variables: unemployment, money stock, money velocity, and industrial production. The study concludes that current percentage inflation already exceeds forecast estimates in the absence of a pandemic scenario through an OLS model. Recognizing transmission lags from exogenous variables to the target variable, an ARDL model is employed, which can incorporate differing leads/lags. Both the models predicted a lower inflation rate in the absence of Pandemic and Government Intervention than the actual inflation rate. This was deemed prima facie evidence that inflationary pressure from an increase in Money supply overpowered decreases in employment and money velocity. It was posited that when the economy reopens, this effect may further worsen due to the theoretically direct relationship between velocity, employment, and inflation. The study cautions runaway inflation, akin to Latin America’s failed trials in Modern Monetary Theory type policies and many instances enshrined in history.

Money Growth and Social Stability

Aim: Both the Keynesian and the Fisherian channels of sovereign money growth have slowed down significantly in the decade following the Global Financial Crisis (GFC). This, together with the rise of fintech, privately issued unbacked crypto-assets tried to fill this void. These developments have revived the interest on the Central Bank Digital Currency (CBDC) idea and on potential channels for future sovereign money growth. The aim of this paper is to compare the Keynesian and Fisherian channels of sovereign money growth regarding their impact on wealth distribution and inflation. 
 Design / Research Methods: To achieve our aim we use a simple Agent Based Model (ABM) to capture heterogeneity. In our model, the agents are heterogeneous consumers with different spending propensities but with equal initial wealth levels and with exactly same non-interest incomes over time. 
 Conclusions / findings: We show that Keynesian (uniform) money growth channel has a softening effect on the wealth dispersion and thereby, on the downward pressure on money velocity. The model indicates that the inclusive nature of current post-Covid19 recovery plans may have a desirable impact on social stability. Yet, these plans may also be more inflationary in comparison the post-GFC policies.
 Originality / value of the article: This paper shows that heterogeneity of economic agents should not be ignored by policy makers and that ABM is a convenient tool to design and analyse monetary and fiscal policies under heterogeneity.
 Implications of the research: The implication for policy makers is that the demand deficiency associated with the fall in money velocity and the worsening of wealth dispersion may be softened by a more inclusive money growth regime, potentially with the practical use of CBDCs. Yet the extra inflationary impact of such a regime need to be kept in mind.

Impact of Foreign Reserves and Economic Growth on Money Supply: Evidence from the WAMZ Countries

This paper analyzes the impact of foreign currency reserve and economic growth on money supply using panel data from five West African Monetary Zone (WAMZ) member states from 2001-2019. The study employed the dynamic technique, fully modified ordinary least squares and dynamic ordinary least squares (FMOLS and DOLS), and the static method (fixed effect model) for the robustness check. The long run results showed that foreign currency reserves (FCR) have a positive impact on money supply, implying that a one percent increase in FCR augments money supply (M2) by 2.87%, 0.44% and 0.08%, respectively, in the long run. Similarly, economic growth is associated with an increase in money supply in both models. Furthermore, the Dumitrescu & Hurlin (2012) estimation revealed a feedback association between foreign currency reserve and money supply. This means that foreign reserves and money supply are complementary. Conversely, a unidirectional causality moving from economic growth to M2 is observed, demonstrating that economic growth causes M2. This outcome is explained by the quantity theory of money (QTM) in which the velocity of money is a positive function of total money supply. As money circulates in the economy as a result of a surge in investments, this consequently increases money stock. Similarly, investment opportunities that are being exploited day-by-day explains the growing money stock (WAMI, 2018). Central banks should endeavor to monitor the expansionary influence of net foreign assets (NFA) on money supply growth in the WAMZ by establishing suitable methods to sterilize foreign exchange infusions into the economy.

ELECTRONIC PAYMENT AND ECONOMIC GROWTH IN INDONESIA

The purpose of this study is to investigate the effect of non-cash payment transactions on economic growth in Indonesia and to see the responses from supporting variables, such as the velocity of money and the price of transactions. This study involves a Vector Error Correction Model (VECM) analysis tool, using monthly time series data during 2009: 1 – 2017: 12. The results show that the payment instrument affects economic growth, especially the Card-Based Payment Instrument (CBPI). In addition, there are changes to the velocity of money and prices caused by the increase in the use of non-cash payment instruments. Keywords: Electronic Payment, Economic Growth, Vector Error Correction Model (VECM)JEL: E4; C51

The underground economic activity and the desire for corruption in the border region (study of Bengkayang District, West Kalimantan)

Underground economic activity is a situation that needs particular and ongoing attention. This tendency is detrimental to municipal income and is associated with corrupt behaviors and taxation. The purpose of this investigation is to identify and assess the practices of the underground economy, as well as the potential for corrupt conduct and tax evasion. The analytical tool was perhaps a qualitative method with a chosen strategy to identify knowledge sources (respondents) with subjects such as liquor producers, coffee shops, and street food vendors in the Bengkayang border area. The data collection method was carried out using a triangulation approach, namely an in-depth interview, observation, and recording/documentation. The data analysis approach was conducted using data reduction, data presentation, and verification. This study suggests that the presence of corrupt activity in collecting bribes and offering bribes is carried out in cash without going through an automated money processing mechanism such as giving false receipts. Increasing the level of corruption in society will contribute to an increase in the velocity of money. The need for massive surveillance of individuals and the introduction of Penta helix elements to shape synergies between actors and to start integrating and developing electronic/digital structures in any financial activity using the e-government system.

Debit and Credit Cards: Money Velocity Risks

Payment system innovations as the efforts to meet the people’s needs have recently risen several new non-cash-based payment instruments, such as card-based payment transactions. The upheaval of card-based non-cash transactions has indirectly shifted the role of cash in the society. This research aims to see the effect of cards as payment instruments represented by both debit and credit cards on money velocity in Indonesia within the period of 2016M1 to 2020M6 using the VECM (Vector Error Correction Model) analysis method. The research findings show that long-run card-based payment instrument has a significant effect on money circulation in Indonesia. It means that money velocity in Indonesia is not constant. Money velocity is a key concept in monetary theories and an important element for monetary analysis. Therefore, it is important for central bank to monitor and understand the money velocity trends to provide long-term benefits. The research findings are also expected to provide an additional insight to policymakers, especially central bank as monetary authority doe to the possibly occurring risks caused by the money circulation instability in economy.

EFFICIENCY MODEL FOR THE PROLIFERATION OF SECONDARY MARKET SUPPLY CHAIN – WITH REFERENCE TO THE INDIAN GARMENT CLUSTER

The growth of secondary market in retail garment trade has been a major boost to economic growth in developing nations. This paper highlights the importance of effective forward and reverse supply chain the garment sector as driver for this booming secondary market. A conclusive research technique has been adapted to study the supply chain practices followed in the garment business those in the primary and secondary market. Structural equation modelling is used to validate and test the proposed model for supply chain performance. Cluster sampling method was incorporated. Owners of garment manufacturing firms in and around Coimbatore, Tirupur, Salem, Bargur and Bengaluru region would form the respondent group. A structured questionnaire was given to them to understand their supply chain practices, supply chain flow velocity and flow efficiency and its impact on their business performance. The firms operating under uncertain circumstances in the secondary supply line have adopted practices which lead to appropriate velocity and efficient flow of money, material and information which has been proved through the testing of the model. The velocity and efficiency in the supply line has improved the performance thereby ensuring a more sustainable business for the firm operating in the secondary markets. This study has contributed in understanding the various dimensions of best supply chain practices and its effect on the flow velocity and flow efficiency of the money, material, and information in the secondary market garment supply chain. An assessment of the results of the study has opened a window to the operations of the secondary garment supply chain line in the Indian cloth market which have been more or less camouflaged under the primary market operations. The outcome of the research also shows that these secondary market players have evolved their own strategies to sustain in volatile and uncertain circumstances. These strategies have proved to be very effective in minimizing wastage and increasing profitability of the manufacturing firms. The implications of this study is bound to give much needed support and leverage to the frail and underperforming secondary garment cluster which is a major contributor of Gross Domestic Product and employment ratio.

Velocity of Money in Ethiopia

Velocity of money is an important instrument used to measure the monetary target and quality of monetary policy. Referencing the trends in the money velocity, mainly in the short term, will have a paramount effect in determining the trends in real money growth. This study investigates the main causes of money velocity in Ethiopia using time series data for the period 1974/75 to 2015/16. A regression with Bayesian estimation and nonparametric Locally Weighted Scatterplot Smoothing (LOWESS) methods were used to analyze the data. Variables such as credit, real interest rate, real exchange rate and real per capita income were included as potential determinants of money velocity. The findings of using non-parametric LOWESS methods show an upward trends in the velocity of money since 2002 and downward trends before 2002, indicating the existence’s of prudent monetary policy in Ethiopia after 2002. The result also shows a positive effect of real exchange rate and credit, whereas income per capita and real interest rates have a negative effect on velocity of money in Ethiopia. Hence, this paper recommends that, the policy to encourage sustainable economic growth and increase in interest rate would be beneficial to reduce velocity of money.

E-Banking and Monetary Policy in Nigeria

The goal of this paper is to assess the impact of e-banking, which are distinct from conventional banking systems, on central banks’ monetary policy. E-banking poses a challenge to central banks’ ability to control interest rates and it may also increase endogenous financial instability. The challenge to interest rate control stems from the possibility that e-banking may diminish the financial system’s demand for central bank liability, rendering central banks unable to conduct meaningful open market operations. Increased financial instability could emerge from the increased elasticity of private money production and from the periodic runs out of e-banking into central bank money that generates liquidity crises. Similarly, the future of e-banking is dependent on its growth, regulation and increased technological advancements that would boost the security of the new instrument. It will directly impact the central bank’s control of monetary policy unless it is included in its measurements of monetary aggregates. We therefore recommend that since the impact of e-banking on monetary policy depends solely on how fast it will spread and the extent to which it will substitute for cash, it is vital that Central Bank of Nigeria (CBN) considers taking steps to compensate the resulting decrease in its balance sheet. Also, CBN must have to impose special obligations with the money reserve on the e-banking issuer in case of any large increase in e-banking creativity that will affect the monetary policy at the end. The government must keep the rate of prices stable and with this condition, where e-banking will be equal to other forms of money which maintain by apportion percentage as a reserve ratio to the central bank. Similarly, if e-banking spreads moderately, there will be a decrease in the seigniorage income and thus, the decrease in the balance sheet of CBN will be limited. Hence, it must include e-banking in monetary aggregates that the spread of e-banking may lead to a change in the velocity of money. Keywords: monetary policy, e-banking, technology, velocity of money

Velocity of money and shadow economy

ABSTRACT Using two novel datasets of the size of the shadow economy and the velocity of money, this study examines the effect of informality on money velocity. Using a novel annual cross-country panel dataset and covering 104 countries for the period between 1960–2017, the study shows that in countries where the shadow sector size is relatively larger, the velocity of money is also higher. Since the velocity of money has various effects on monetary policy outcomes (e.g. inflation) we believe that this would be crucial for the design of monetary policy as central banks, particularly in countries, where the shadow economy is larger, should take this relationship into account.

Interest rates, liquidity and the corporate financing decision throughout the business cycle: a European analysis

ABSTRACT The global financial crisis has shown that money affects the real economy. This study examines the influence of the price and stock of money in the economy on capital structure throughout the business cycle during the last financial crisis, with particular focus on the roles of long- and short-term interest rates, spread rates, and liquidity as reflected in the supply and velocity of money. The results, for a panel of listed European firms, indicate the significant impact of these variables on leverage, which they find to be linked positively to long- and short-term interest rates and negatively to term spread in both phases (expansion and recession) of the business cycle. They also suggest that liquidity requirements play a crucial role in the corporate financing decision. Finally, the speed of adjustment to the target debt ratio, normally significantly lower during recessions than during expansions, appears subject to business cycle fluctuations.

Juridic Analysis Of Revocation Of Homology For Delaying Debt Payment Obligations (Case Study between PT. X and PT. Y)

In the business world, of course, can experience ups and downs in corporate earnings. Not always the company always gets a profit, but there are times when the company suffers losses that ultimately have an impact on the velocity of money in the company. This triggers debts that must be done by the company in order to continue to run the company properly. Borrowing funds or money made by a company can be through a bank or a fellow company. If there is an agreement from the two companies, the debt-receivable transaction can run properly. There are times when companies that become debtors again experience problems that result in not being able to pay their debts in a timely manner in accordance with the agreement between them. That caused the company that became a creditor to make legal efforts to continue to receive payment of money. Both the debtor and the creditor can submit a Deferment of Obligation for Debt Payment (PKPU) to settle debts between them. Both the debtor and the creditor can submit a Deferment of Obligation for Debt Payment (PKPU) to settle debts between them. Despite these efforts, it still cannot avoid other problems. Problems usually occur after the approval of the peace plan (Homologation) which is included in the Delayment of Obligations of Debt Payments that ends in the withdrawal of the peace carried out by the Commercial Court. Although it has been revoked, those who feel dissatisfied with the results of the decision can take legal action through cassation and judicial review through the Supreme Court. Problems usually occur after the approval of the peace plan (Homologation) which is included in the Delayment of Obligations of Debt Payments that ends in the withdrawal of the peace carried out by the Commercial Court. Although it has been revoked, those who feel dissatisfied with the results of the decision can take legal action through cassation and judicial review through the Supreme Court. The purpose of this research is to know the role of peace Treaty (Homologasi) in the application of postponement of debt payment obligation (PKPU) PT. X. And also to know the consequences incurred if the peace treaty (homologation) was canceled by the judge against the payment of PT. X debt. Using the juridical-normative method of supporting this research report.

Population aging and money demand

This paper proposes the hypothesis that population aging could lead to higher demand for money. A testable implication is derived from this hypothesis on the basis of Friedman’s money demand function, which is that the proportion of old-age population is negatively correlated with the velocity of money. The testable implication is verified with the cross section data of 204 countries and the time series data of the US. This paper’s study provides a partial explanation for why the quantity theory of money appears ineffective in developed countries.

How Entrepreneurial University Model is changing the Indian COVID–19 Fight?

It is indeed a great misnomer to analyze the dimensions of academic capitalism with the steady rise of entrepreneurial university in lines with Western educational policies. It is indeed a long treaded journey in emerging underdeveloped economies which has given the notion of a dream of the next superpower wherein entrepreneurial universities are a very recent concept post liberalization of economy and change in governmental practices and loosing hold over bureaucratic affairs which has led more stronger the innovation landscape of industry–education–government nexus in building the nation. Recent years have seen the great crisis of COVID pandemic which has changed the ideologies and theoretical models underlying economic welfare states and the velocity of money running through society. Amidst huge literature in entrepreneurial university studies, very little work has been done which answers the very pertinent question and research gap of how the triple helix model arrived in India and how the central government in India changed its beliefs globally by inheriting such model in its innovation practices to champion the cause of bringing new products, economic welfare, product development; which transformed India’s idea of being an importer of healthcare facilities to an expert and exporter of medical facilities thus completely reversing the cycle of trade and global logistics in healthcare economic practices. This paper works on such exploratory case study concerning India’s success story in employing triple helix model of innovation in national policy practices and world economy.

ELECTRONIC BASED PAYMENT SYSTEMS AND ECONOMIC GROWTH IN INDONESIA

This research aims to analyze the effect of electronic payment systems based on credit cards, debit cards, and electronic money, as well as macroeconomic variables namely the money supply (M1), price level, and velocity of money towards real gross domestic product as a proxy for economic growth. The estimation carried out in this journal uses the Vector Error Correction Model (VECM) with period time series data of 2010:1-2018:12. The results of the journal show that doing debit card and electronic money-based transactions has a significant positive effect on economic growth in Indonesia in the long run.Keywords : Electronic payment systems, electronic money, credit cards, debit cards, economic growth, Vector Error Correction Model (VECM) Keywords: Electronic payment systems, electronic money, credit cards, debit cards, economic growth, Vector Error Correction Model (VECM) JEL : O470 C320

Multiplier and Velocity of Money Relationship of Cartal and Electronic in Indonesia 2009.Q1-2018.Q4

This research explain about the impact of electronic money and currency on money multiplier M1 and velocity of money M1 with VECM analyzing method. data used in this reserach are secondary data, it used from 2009 quarter I until 2018 quarter IV. There are 4 measurements that are used to measure money multiplier, electronic money, currency ratio, excess reserve ratio, reserve requirement ratio. To measure velocity of money there are 5 measurements that are used, electronic money, currency, inflation, product domestic product, and interest rate SBI. The result found that in the long term electronic money and currency affected money multiplier M1. On the velocity of money model electronic money and currency affected velocity of money M1 on the long term. The result of impulse response function (IRF) on money multiplier M1 show that electronic money has a positive correlation, while the currency ratio has a negative correlation, on the velocity of money model both electronic money and velocity of money showed a negative correlation. In variance decomposition found that electronic money has a huge contribution to affect money multiplier model and velocity of money model M1. Thus the results of the study can be concluded that electronic money affected both money multiplier M1 and velocity of money M1. The monetary authorities should take electronic money into consideration as crucial variable in the money supply to maintain the stability of money supply.

KEMAJUAN TEKNOLOGI DAN KECEPATAN PERPUTARAN UANG: STUDI KASUS INDONESIA

Technological developments and financial innovations, especially in the payment system, have encouraged banks around the world to carry out a number of innovations that have resulted in a new paperless based financial system. The finding that the payment system innovation affects the circulation of money and the stability of the monetary condition of a country, makes this risk possible in Indonesia. By using the error correction model, this study can provide information on the short run dynamic relationship and the impact of payment system innovation represented by non cash payment instruments such as credit cards, debit cards, e-money and payment transaction settlement processes (national clearing system and real time gross settlement) on the velocity of money in Indonesia in the period 2016M1 to 2020M6. The results of the research findings state that the impact generated by the rapid velocity of payment system innovation on the velocity of money circulation is not temporary, this is evidenced by the effect of payment system innovation on the velocity of money circulation which continues over a long period of time.

Kemajuan Teknologi dan Kecepatan Perputaran Uang: Studi Kasus Indonesia

Technological developments and financial innovations, especially in the payment system, have encouraged banks around the world to carry out a number of innovations that have resulted in a new paperless based financial system. The finding that the payment system innovation affects the circulation of money and the stability of the monetary condition of a country, makes this risk possible in Indonesia. By using the error correction model, this study can provide information on the short run dynamic relationship and the impact of payment system innovation represented by non cash payment instruments such as credit cards, debit cards, e-money and payment transaction settlement processes (national clearing system and real time gross settlement) on the velocity of money in Indonesia in the period 2016M1 to 2020M6. The results of the research findings state that the impact generated by the rapid velocity of payment system innovation on the velocity of money circulation is not temporary, this is evidenced by the effect of payment system innovation on the velocity of money circulation which continues over a long period of time.