Abstract
The income velocity of money expresses a unique relationship – what is the production that an economy can create with a given money stock or how much money is needed to create a given production. The aim of this chapter is to elaborate on the factors that are behind the money velocity. An overview of the potential determinants of money velocity will be presented together with a brief description of the determinants. Where available, data relevant for the Czech Republic are presented. The examined period is 2000–2018, when the money velocity experienced a gradual decline.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
To simplify, further only “money velocity” or “the velocity of money.”
- 2.
V2 = Income velocity of money when money is defined as the monetary aggregate M2.
- 3.
In fact, each koruna was used more than 2 times on average if we talk about all economic transactions. However, when expressing the income velocity of money, we are concerned only about transactions that are used to calculate gross domestic product.
- 4.
Strictly speaking, only coins were considered money, not banknotes.
References
Arioli, R., Bates, C., Dieden, H., et al. (2017). EU consumers’ quantitative inflation perceptions and expectations: An evaluation (Occasional Paper Series 186). European Central Bank.
Cimburek, J., & Rezabek, P. (2013). Currency in circulation: Reaction in crises [In Czech]. Cesky financni a ucetni casopis, 3, 62–72. https://doi.org/10.18267/j.cfuc.358
Czech National Bank. (2007). Novy pristup CNB ke sledovani inflacnich ocekavani domacnosti v Ceske republice. [seen 2020-02-22]. https://www.cnb.cz/cs/menova-politika/zpravy-o-inflaci/tematicke-prilohy-a-boxy/Novy-pristup-CNB-ke-sledovani-inflacnich-ocekavani-domacnosti-v-Ceske-republice/
Humphrey, T. M. (1993). The origins of velocity functions. Federal Reserve Bank of Richmond Economic Quarterly, 79(4), 1–17.
Jilek, J. (2015). Makroekonomicky dopad rustu sirokych menovych agregatu ve vybranych zemich v letech 1960–2007 [In Czech]. Ekonomicky casopis/Journal of Economics, 63(1), 3–18.
Maddigan, R. J. (1981). The measurement of vertical integration. The Review of Economics and Statistics, 63(3), 328–335. https://doi.org/10.2307/1924349
Michl, A. (2019). Money and inflation: Lost cointegration [In Czech]. Politicka ekonomie, 67(4), 385–405. https://doi.org/10.18267/j.polek.1255
Ponomarenko, T., & Sergeev, I. (2016). Quantitative methods for assessing levels of vertical integration as a basis for determining the economic and organizational sustainability of an Industrial Corporation. Indian Journal of Science and Technology, 9(20). https://doi.org/10.17485/ijst/2016/v9i20/94482
Woodford, M. (2008). How important is money in the conduct of Monetary Policy? Journal of Money, Credit and Banking, 40(8), 1561–1598. https://doi.org/10.3386/w13325
Acknowledgments
This paper has been prepared within the research project “Dynamika financnich a ekonomickych velicin v kontextu vnejsi rovnovahy,” registered by the Grant Agency under the registration number F1/03/2020.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2022 The Author(s), under exclusive license to Springer Nature Switzerland AG
About this paper
Cite this paper
Bohacik, J. (2022). The Income Velocity of Money – Determinants (Case of the Czech Republic). In: Procházka, D. (eds) Regulation of Finance and Accounting. ACFA ACFA 2021 2020. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-99873-8_2
Download citation
DOI: https://doi.org/10.1007/978-3-030-99873-8_2
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-99872-1
Online ISBN: 978-3-030-99873-8
eBook Packages: Economics and FinanceEconomics and Finance (R0)