Networks Webinar Series - Allison Luedtke
The Janeway Institute hosts the Networks Webinar Series which is organised by George Charlson, Sanjeev Goyal, Matt Elliott and Akhil Vohra.
On Friday 18th February 2022, 13.30 - 2.30pm, the speaker will be Allison Luedtke (St. Olaf College) and her talk will be on her paper "Measuring the Velocity of Money", joint with Carolina Mattsson and Frank W. Takes
Title: Measuring the Velocity of Money, joint with Carolina Mattsson and Frank W. Takes.
Abstract: The velocity of money is an important macroeconomic indicator that is conventionally measured indirectly and as an average for an economy as a whole. This measurement approach obscures heterogeneity in the underlying spending patterns. With the advent of large-scale micro-level transaction data comes the opportunity to measure the velocity of money at the level of individual spenders. In this paper we propose a new measurement methodology that accounts for currency creation and dissolution, which is commonly observed in payment systems yet not accounted for by conventional measurement approaches. For a given payment system’s transaction network, our method enables a systematic comparison of the velocity of money across different spatial, temporal, and demographic subgroups of spenders. Moreover, we can observe how events such as a pandemic or targeted currency operations affect the velocity of money across these subgroups. Using data from a community currency in a developing country, we find the following: (1) transaction volume comes from fast-moving money, while much of the balance at any particular point in time is slow-moving, (2) transaction rhythms differ between rural and urban areas, in particular, money moves faster in urban communities, and (3) there was rapid circulation as COVID-19 unfolded. The approach described in this paper may improve understanding of heterogeneity in macroeconomic patterns and inform policies that affect these patterns.