The velocity of money in a life-cycle model

Yougui Wang and Hanqing Qiu

Physica A: Statistical Mechanics and its Applications, 2005, vol. 353, issue C, 493-500

Abstract: The determinants of the velocity of money have been examined based on life-cycle hypothesis. The velocity of money can be expressed by reciprocal of the average value of holding time that is defined as interval between participating exchanges for one unit of money. This expression indicates that the velocity is governed by behavior patterns of economic agents and opens a way for constructing micro-foundation of it. It is found that time pattern of income and expense for a representative individual can be obtained from a simple version of life-cycle model, and average holding time of money resulted from the individual's optimal choice depends on the expected length of relevant planning periods.

Keywords: Velocity of money; Holding time; Life-cycle hypothesis; Micro-foundation (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:353:y:2005:i:c:p:493-500

DOI: 10.1016/j.physa.2005.01.053

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