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The Effect of Confidence on Income Velocity in a Politically Unstable Environment: Wartime South Vietnam
Author(s) -
Dacy Douglas C.
Publication year - 1984
Publication title -
kyklos
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.766
H-Index - 58
eISSN - 1467-6435
pISSN - 0023-5962
DOI - 10.1111/j.1467-6435.1984.tb00709.x
Subject(s) - proxy (statistics) , battlefield , economics , inflation (cosmology) , vietnam war , confidence interval , variable (mathematics) , development economics , economic history , history , political science , ancient history , law , mathematics , statistics , physics , mathematical analysis , theoretical physics
SUMMARY At the turn of this century WESLEY C. MITCHELL argued that the velocity of money could be influenced by a noneconomic variable that he called ‘confidence’; but the idea has received little attention since then. This study uses events in the long Vietnam war for statistically demonstrating the MITCHELL hypothesis. U. S. troop presence in South Vietnam boosted the peoples' confidence in their country's future thereby stabilizing the demand for fiat money and income velocity. Only two variables ‐ the previous year's rate of inflation and U. S. troop strength, which serves as a proxy for battlefield victories ‐ are needed to explain movements in velocity.