ABSTRACT
This chapter proposes an explanation for the pattern stressing the influence of institutional factors. It approaches the downward trend which is attributable to the process of monetization, and the upward trend to two developments: increasing financial sophistication and improved economic stability. The chapter explains the extent to which accounting for institutional factors improves or reduces the explanation for the long-run behaviour of velocity provided by the traditional determinants. It changes in the quality of the service flows yielded by money and other assets that induce a series of substitutions between assets yielding monetary and nonmonetary services. The growth of substitutes for metallic currency implies that a given amount of hard cash can form the basis for a larger volume of transactions than previously was the case. The chapter explores the various studies in economic history have emphasized the process of monetization as an aspect of the growth of commercial banking.
