Publication Date


Document Type


First Advisor

Leroy, Lester

Degree Name

M.A. (Master of Arts)

Legacy Department

Department of Economics


Monetary policy--United States; Inflation (Finance)--United States


During the past two decades, various restrictive monetary policies have been implemented in on effort to combat creeping inflation." Since the effectiveness of these anti-inflationary monetary policies is highly dependent upon a fairly stable income velocity, numerous empirical and theoretical studies have focused attention upon the causes of increases in velocity, in this thesis, four major hypotheses concerned with possible causes of increases in velocity are critically analyzed. The evaluation of hypotheses (chapter four) is done within the theoretical framework of chapter two and the empirical framework of chapter three. Chapter five examines. In depth, the implications of velocity increases for the effectiveness of restrictive monetary policies. This broad analysis of velocity increases avoids the pitfall of placing too much stress upon one hypothesis. It also uncovers some interrelationships which may exist between various factors responsible for velocity increases. In its entirety, this thesis seriously questions the continued effectiveness of restrictive monetary policy. Any final determination of the ultimate degree of loss in the effectiveness of restrictive monetary policies, attributable to velocity increases, is left to the individual. However, the thesis does prove that velocity increases are an obstacle to restrictive monetary policies, regardless of the length of the time period during which such policies are implemented. In view of the repeated use of restrictive monetary policies in the past, it is difficult to underestimate the importance of velocity studies and the necessity for additional work in this subject area.


Includes bibliographical references.


72 pages




Northern Illinois University

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