Monetarists believed for a period of time that the velocity of money was stable within a country. However, with financial innovation, the velocity began shifting around erratically after 1980. As would be expected, the velocity of money is different across countries depending upon the sophistication of their financial systems€”velocity of money tends to be higher in countries with developed financial systems. The following table provides money supply and GDP information in 2016 for seven countries.

Data from: Statistics Canada, Central Bank of Egypt; Bank of Korea; Bank of Thailand; U.S. Federal Reserve Bank of St. Louis; Central Bank of Kenya; Reserve Bank of India.

a. Calculate the velocity of money for each of the countries. The following table shows GDP per capita for each of these countries in 2016 in U.S. dollars.

Data from: IMF.

b. Rank the countries in descending order of per capita GDP and velocity of money. Do wealthy countries or poor countries tend to €œturn over€ their money more times per year? Would you expect wealthy countries to have more sophisticated financial systems?

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M1 Nominal (billions in GDP (billions in national currency) National national currency) Country currency Canada Canadian dollars 856 2,028 Egypt Egyptian pounds 540 1,838 South Korea Korean won 1,466,788 734,412 Thailand Thai baht 1,864 9,501 United States U.S. dollars Kenyan pounds 3,327 16,397 Kenya 1,309 4,050 India Indian rupees 20,059 113,575 Nominal GDP per capita Country (U.S. dollars) Canada $42,210 Egypt 3,685 South Korea 27,539 Thailand 5,899 United States 57,436 Kenya 1,516 India 1,723