Institutional Change and the Velocity of Money: A Century of Evidence.

The authors study common features in the income velocity of money, income, and interest rates for Canada, the United States, the United Kingdom, Sweden, and Norway using annual data from 1870. The recently developed and refined techniques of testing for cointegration are employed. The evidence suggests there is a unique long-run relationship in velocity but not in income and interest rates. Moreover, the authors find that only a model which includes institutional change proxies is properly specified. They argue that the evidence is best interpreted in the context of common historical developments in the respective countries' financial systems. Copyright 1997 by Oxford University Press.