ABSTRACT
This chapter examines the causes underlying the rapid decline of income velocity of money in Sweden in the period 1871-1913. It describes the behavior of velocity and an account of the process of monetization is given covering changes in commercial banking, in wage contracts, in payments practices, and in the composition of the population. The chapter explores the influence on velocity of the standard explanatory variables of the demand-for-money discusses and variables as well as various measures of monetization includes in a number of econometric tests and the test results summarize. Monetization encompassed numerous institutional developments that encouraged the growing use of money at the expense of existing forms of exchange and wealth for settling transactions and storing wealth. The account of this process in Sweden given focuses on three developments they are the rise of commercial banking, changes in wage contracts and in labor markets, and changes in exchange arrangements in the markets for goods.
