Factors Affecting the Money Velocity the Case of the Hashemite Kingdom of Jordan for the period 1980-2015 An Empirical Study

Abstract

The aim of this study is to investigate the factors affecting the velocity of money in its narrow and wide sense (V1 V2). The Kingdom of Jordan, Annual data covering the time period (1980- 2015) were used using modern measurement methods; The autoregressive Distributed lags Model (ARDL) and the ECM Error Correction Model, The study concluded that there is a short-term and long-term equilibrium relationship between the independent variables (income, inflation, financial development, number of banks) and the variables of both models during the study period. The Expanded Dickey Fuller test was used to test the stability of time series, and the (Phillips & perron) test was used to enhance the result of the first test, The study found that 90% of changes in the velocity  of money in the narrow sense V1 are explained by the following independent variables (income, Inflation, financial development, number of banks), and 75% of the speed of money circulation in the wide sense V2 The study concluded stability of the function of velocity  of money in both models V1 V2, and this indicates the ability of monetary policy in Jordan to predict the velocity  of money.