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The Theory And Measurement Of Cash Payments; A Case Study Of The Netherlands

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Author Info
Edgar L. Feige (University of Wisconsin-Madison)

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Abstract

One of the more intractable problems in the area of monetary economics is the measurement of cash payments. Whereas the stock of currency in circulation [C] is well defined and readily measured, the transactions velocity of currency [Vc] (the average number of times currency turns over in any given period) is difficult to measure. This paper examines alternative methods for estimating the average velocity of currency and the denomination specific velocity of cash employing data for the Netherlands. Estimates of the volume of cash payments are necessary to meaningfully measure the volume of total payments [MV] in an economy and hence, the total volume of transactions [PT]. Once the volume of cash payments is known, it is possible to employ Fisher’s equation of exchange [MV=PT] as a more general conceptual and empirical alternative to Keynes’ more limited income-expenditure [Y= C+I+G] identity.

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File URL: http://129.3.20.41/eps/mac/papers/0501/0501025.pdf
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Publisher Info
Paper provided by EconWPA in its series Macroeconomics with number 0501025.

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Length: 32 pages
Date of creation: 20 Jan 2005
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Handle: RePEc:wpa:wuwpma:0501025

Note: Type of Document - pdf; pages: 32
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Web page: http://129.3.20.41

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Related research
Keywords: Cash payments; Velocity of currency; Equation of exchange; total transactions; underground economy.;

Find related papers by JEL classification:
E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
B4 - Schools of Economic Thought and Methodology - - Economic Methodology

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References listed on IDEAS
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  1. Edgar L. Feige, 2004. "How Big IS the Irregular Economy?," Macroeconomics 0404005, EconWPA. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Edgar L. Feige, 2001. "Taxation for the 21st Century: The Automated Payment Transaction (APT) Tax," Public Economics 0106001, EconWPA. [Downloadable!]
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