# What is the actual numerical value of the velocity of money?

All the discussions of the velocity of money that I've come across (e.g. here, here, and here) only display relative changes in the velocity of the money (e.g. by normalizing it by an unspecified value). I've never seen any source report an actual numerical value (with the units of inverse time) for a given point in time, for any choice of money supply. Does anyone have a reference for such a value?

• Which country? I think the St. Louis Fed database (FRED) has a time series. May 2 '18 at 19:41
• @BrianRomanchuk Any country, but in particular I'm interested in the US. The second and third links in my question point to FRED, but they don't answer my question. May 2 '18 at 19:44
• You can calculate it yourself. Simply divide GDP by the amount of money. May 3 '18 at 9:20
• @tparker - I didn’t look at the links, since your description was misleading. The third link shows nominal GDP divided by M2; this is not an unspecified normalisation. The units of GDP are $/year, and the units of M2 is dollars, so the units end up in inverse years, like you asked. The M2 velocity can be thought of as the number of times it turns over as part of GDP transactions in a year. May 3 '18 at 21:16 • @BrianRomanchuk I didn't understand the vertical axis of that plot, since it's just labeled "ratio" without any units specified. They describe the numerator as "quarterly nominal GDP" - does that mean income/quarter, or income/year reported quarterly? I.e. are the units of the vertical axis inverse years or inverse quarters? I can never understand economic data plots because economists never use units correctly. May 3 '18 at 21:29 ## 1 Answer (It appears that the answer was supplied in the original question. The third link was to the time series for the M2 velocity for the United States. This answer is just taking text out of the comments.) The linked chart link to FRED website is of the ratio: (nominal GDP at an annual rate) divided by M2 (for the United States). The units for annualised GDP are \$ per year, and the units for M2 are \$; the \$ cancels and we end up with 1/years as units. (This is tracking units the way that is done in the physical sciences.) If we took non-annualised quarterly GDP, the ratio would be 1/4 as large.

Some economics charts can be confusing from the perspective of physical sciences, because the inverse time units for flows are suppressed. This is a convention that has held for decades; you just have to know what is being done. It probably causes problems because people often look at mixes of stock and flow variables, such as the infamous debt-to-GDP ratio.

• I HATE it when people quote the debt-to-GDP ratio as if it were a percentage, which is completely nonsensical because it clearly isn't. May 4 '18 at 2:32
• It is wrong in so many ways. a purchase and a sale is an interaction, it is something being exchanged. It is much more akin to pressure. Or momentum. M1, M2 on the other hand is counting items in different buckets. It is mass. Or volume. Dem different dollars don't divide. If you say the monetary supply is the mass of money, the gpd is the pressure - it makes sense. Increasing the mass of money, for a fixed volume ("the economy") increases pressure. If the economy contracts, it is a way to counter that contraction. Jun 25 '20 at 10:48
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