Uncertainty and Velocity
Uncertainty and Velocity
In this chapter the two features of uncertainty and the variability of the velocity of money are considered. Both of these are fundamental to considering the more subtle features of a monetary economy. They are interlinked and both add further complex features to the information, perception and control mechanisms of modern monetary systems. There has been an explosive development in the study of both the qualitative and quantitative properties of risk. The power of careful modeling and sophisticated stochastic analysis has already shown itself in the context of the stockmarket and other financial markets, but as the various qualitative aspects of risk are being uncovered and made well-defined, the scope of a useful econo-physics stretches far beyond the confines of the dynamics of paper traded on paper in the financial markets to the broad control mechanisms of the economy as a whole.
Keywords: Exogenous uncertainty, endogenous uncertainty, index construction, loosely coupled systems, bubbles, liquidity, velocity
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