THE MEASUREMENT AND ANALYSIS OF MONETARY TRANSACTIONS

This paper explores linkages between the monetary payments mechanism a nd business activity. We introduce a new measure of the volume of tran sactions associated with output production (TOP) and analyze the empir ical connections between TOP and other macroeconomic variables. The fi rst part of the paper describes the accounting basis of TOP and shows how transactions accounting differs from national income and product a ccounting. We then show how TOP can be derived from the same basic dat a as is used to measure GNP. Next, we examine three applications of tr ansactions accounting: (1) the relationships between monetary payments and other measures of business activity, (2) the flow of cash among e conomic sectors through payments and receipts, and (3) the transaction s velocity of money. In each application, we find that TOP fills an im portant gap. Finally, we observe that TOP provides a bridge that links the productive activities of an economy with its monetary payments me chanism.