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The Velocity of Money in a Life-Cycle Model

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  • Yougui Wang
  • Hanqing Qiu

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 which 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 open a way to 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.

Suggested Citation

  • Yougui Wang & Hanqing Qiu, 2005. "The Velocity of Money in a Life-Cycle Model," Papers physics/0507159, arXiv.org.
    • Handle: RePEc:arx:papers:physics/0507159
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    File URL: http://arxiv.org/pdf/physics/0507159
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    Cited by:

    1. Xing, Xiaoyun & Xiong, Wanting & Chen, Liujun & Chen, Jiawei & Wang, Yougui & Stanley, H. Eugene, 2018. "Money circulation and debt circulation: A restatement of quantity theory of money," Economics Discussion Papers 2018-1, Kiel Institute for the World Economy (IfW Kiel).
    2. Barrio, Rafael A. & Govezensky, Tzipe & Ruiz-Gutiérrez, Élfego & Kaski, Kimmo K., 2017. "Modelling trading networks and the role of trust," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 471(C), pages 68-79.
    3. Yougui Wang & Ning Ding, 2005. "Dynamic Process of Money Transfer Models," Papers physics/0507162, arXiv.org.
    4. Yougui Wang & Ning Ding & Ning Xi, 2005. "Prospects for Money Transfer Models," Papers physics/0507161, arXiv.org.
    5. Bamadev Paudel, 2017. "Alleviating Poverty through Job Creation: Quantity Equation of Money may Come into Play," Journal of Development Innovations, KarmaQuest International, vol. 1(1), pages 84-113, February.
    6. repec:kqi:journl:2017-1-5 is not listed on IDEAS

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