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Public Economics

1980

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The Velocity Of Money: Evidence For The U.K. 1911-1966, Philip E. Graves Jan 1980

The Velocity Of Money: Evidence For The U.K. 1911-1966, Philip E. Graves

PHILIP E GRAVES

This paper presents secular evidence on the income velocity of money, exploring the issue of the superiority of money balances. Under a variety of specifications and statistical techniques, employed on both traditional and non-traditional variables, the Friedman assertion that money is a superior good is found to lack empirical support. Indeed, income elasticities of demand for M2 balances of .3 to .45 are observed, elasticities much smaller than previously thought.