| Title | Release Dates | |
| Velocity of M1 Money Stock | 2010-07-30 | 2024-02-28 |
| Source | ||
| Federal Reserve Bank of St. Louis | 2010-07-30 | 2024-02-28 |
| Release | ||
| Money Velocity | 2010-07-30 | 2024-02-28 |
| Units | ||
| Ratio | 2010-07-30 | 2024-02-28 |
| Frequency | ||
| Quarterly | 2010-07-30 | 2024-02-28 |
| Seasonal Adjustment | ||
| Seasonally Adjusted | 2010-07-30 | 2024-02-28 |
| Notes | ||
| Calculated as the ratio of quarterly nominal GDP (https://fred.stlouisfed.org/series/GDP) to the quarterly average of M1 money stock (https://fred.stlouisfed.org/series/M1SL). The velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy. | 2010-07-30 | 2021-02-24 |
| Calculated as the ratio of quarterly nominal GDP (GDP (https://fred.stlouisfed.org/series/GDP)) to the quarterly average of M1 money stock (M1SL (https://fred.stlouisfed.org/series/M1SL)) The velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy. The frequency of currency exchange can be used to determine the velocity of a given component of the money supply, providing some insight into whether consumers and businesses are saving or spending their money. There are several components of the money supply,: M1, M2, and MZM (M3 is no longer tracked by the Federal Reserve); these components are arranged on a spectrum of narrowest to broadest. Consider M1, the narrowest component. M1 is the money supply of currency in circulation (notes and coins, demand deposits, and other liquid deposits). A decreasing velocity of M1 might indicate fewer short- term consumption transactions are taking place. We can think of shorter- term transactions as consumption we might make on an everyday basis. Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately. For more information on the H.6 release changes and the regulatory amendment that led to the creation of the other liquid deposits component and its inclusion in the M1 monetary aggregate, see the H.6 announcements (https://www.federalreserve.gov/feeds/h6.html) and Technical Q&As (https://www.federalreserve.gov/releases/h6/h6_technical_qa.htm) posted on December 17, 2020. The broader M2 component includes M1 in addition to saving deposits, certificates of deposit (less than $100,000), and money market deposits for individuals. Comparing the velocities of M1 and M2 provides some insight into how quickly the economy is spending and how quickly it is saving. MZM (money with zero maturity) is the broadest component and consists of the supply of financial assets redeemable at par on demand: notes and coins in circulation, traveler’s checks (non-bank issuers), demand deposits, other checkable deposits, savings deposits, and all money market funds. The velocity of MZM helps determine how often financial assets are switching hands within the economy. | 2021-02-25 | 2024-02-28 |
FAQs
Velocity of M1 Money Stock? ›
Velocity of M2 Money Stock in the US is the frequency at which one unit of "M2 Money Stock" is used to purchase domestically-produced goods and services in a quarter. M2 Money Stock includes all currency in circulation (M1 Money Stock) and also various savings vehicles like savings accounts, money market funds and CDs.
What is the velocity of M2 money stock? ›Velocity of M2 Money Stock in the US is the frequency at which one unit of "M2 Money Stock" is used to purchase domestically-produced goods and services in a quarter. M2 Money Stock includes all currency in circulation (M1 Money Stock) and also various savings vehicles like savings accounts, money market funds and CDs.
How do you find the velocity of M1? ›How Do You Calculate the Velocity of Money? The velocity of money is calculated by dividing a country's gross domestic product by the total supply of money.
How does velocity affect the money stock? ›Money Supply – Money supply and the velocity of money are inversely proportional. If the money supply in an economy falls short, then the velocity of money will rise, and vice versa. Frequency of Transactions – As the number of transactions increases, so does the velocity of circulation.
What is the velocity of MZM money stock? ›Calculated as the ratio of quarterly nominal GDP (GDP) to the quarterly average of MZM money stock (MZMSL). The velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period.
What is the velocity of M1 money in the US? ›Velocity of M1 Money Stock in the US is at a current level of 1.574, up from 1.551 last quarter and up from 1.39 one year ago. This is a change of 1.48% from last quarter and 13.24% from one year ago.
Why is M2 velocity so low? ›But the actual velocity has gone down by 5.85 points, 69 times larger than predicted. This happened because the nominal interest rate on short-term bonds has declined essentially to zero, and, in this case, the best form of risk-free liquid asset is no longer the short-term government bonds, but money.
How to interpret the velocity of money? ›The transactions velocity is the number of times on average that a dollar is used for a transaction. If the velocity were fifty-two, for example, then on average a dollar changes hands once each week.
How to calculate velocity? ›In the equation V = d/t, V is the velocity, d is the distance, and t is the time. Determine the object's acceleration by dividing the object's mass by force and multiply the answer by the time it took for it to accelerate.
How to increase the velocity of money? ›Basically, if the rise in interest rate reduces the real money balance relative to the volume of personal consumption (spending), then the velocity increases (Barro, 108). But if the personal consumption decreases proportionally more than the reduction of the real money balance, then the velocity of money decreases.
Does the velocity of money cause inflation? ›
Money velocity drives inflation because the more times currency changes hands, the more robust the economic activity, thereby increasing competition for goods and services and driving prices higher.
What is velocity of money investment? ›The velocity of money refers to the rate at which money circulates through the economy. It's chiefly determined by how fast transactions occur. For financial traders, identifying the velocity of money and what's propelling it can help you to analyse markets and identify trading opportunities.
What is an example of velocity? ›To figure out velocity, you divide the distance by the time it takes to travel that same distance, then you add your direction to it. For example, if you traveled 50 miles in 1 hour going west, then your velocity would be 50 miles/1 hour westwards, or 50 mph westwards.
What is M1 money stock? ›M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of ...
What is the velocity of money calculator? ›The velocity of money calculator determines how many times the money moves between the population or a group of people. It is a concept of economics that affects the money supply, demand and inflation (our inflation calculator can help you understand more).
What affects the velocity of money? ›Money supply, transactions and their frequency, consumer actions, and credit facilities are some factors affecting the velocity of money circulation in an economy.
What is the velocity of money M1 and M2? ›The measure of the velocity of money is usually the ratio of the gross national product (GNP) to a country's money supply. Chart showing the log of the velocity (green) of the U.S. M2, calculated by dividing nominal GDP by the M2 stock (M1 plus time deposits), 1959–2010.
What is the velocity of money investing? ›The velocity of money is the rate at which consumers and businesses spend money in an economy. Generally, the velocity of money is taken as the number of times that a unit of currency is used to purchase goods and services in a defined period.
What is the velocity of money metrics? ›The velocity of money is an economic metric that tracks the speed and rate at which money travels through the wider economy. In simple terms it tracks the number of times that money shifts from one entity to another, and also how much a unit of currency is used over a specific time frame.
What is the velocity of the money multiplier? ›The money multiplier measures the amount the money supply increases when new money is injected into the economy. There is a positive correlation between money velocity and the money multiplier. This means that as the money velocity increases, the money multiplier also tends to increase, and vice versa.