MONEY, OUTPUT AND INCOME VELOCITY

This paper attempts to assess empirically the contribution of three st ructural shocks - monetary, institutional (financial and fiscal), and technological - to output and velocity fluctuations in the national ba nk era and the post-1973 period. To identify these shocks we impose on ly long-run restrictions, derived from a monetary growth model. We fin d that higher money growth increases (decreases) velocity in the first (second) period, depending crucially on the resulting changes in the transactions frequency. Credit-enhancing financial or expansionary fis cal shocks have a permanent positive effect on velocity and a hump-sha ped effect on output, whereas technological shocks cause velocity to d ecrease in the short run and output to move to a permanently higher le vel.