Introduction to the Macroeconomic Dynamics Special Issues on Money, Credit, and Liquidity (original) (raw)

Rethinking the Theory of Money, Credit, and Macroeconomics

Review of Political Economy, 2019

This essay presents an overview and assessment of John Smithin's 2018 book Rethinking the Theory of Money, Credit, and Macroeconomics. Smithin continues the projects of Keynes and Minsky with the aim of providing a general account what how the macroeconomy actually works. The essay evaluates Smithin's alternative monetary model of the economy in the light of several key Post-Keynesian themes.

Money, Financial Institutions and Macroeconomics

1997

Glaze prepared the camera-ready copy of the manuscript with extraordinary skill, dedication and good grace. We would also like to thank Warren Samuels and William Darity for encouraging the project, and Zachary Rolnick at Kluwer for his support and patience. This collection of papers aims to present a comparative and international perspective on the current state of research in monetary theory, and the application of monetary theory to important policy issues. The main emphasis is on views stressing the importance of credit creation in the monetary process, in a tradition which arguably encompasses Wicksell, the later Swedes and the Austrians, through the later Hicks, the circuit school and contemporary Post Keynesians. In addition, however, there are distinguished contributions from economists with a more 'mainstream' approach to the issues.

A Simple Economic Theory of Money Supply and Some Comments on Monetarist Double Count

SSRN Electronic Journal, 2000

In this paper I analyze the effect of money supply on total credit supply. The analysis shows that money supply of the central bank plus money supply of commercial banks increase total credit supply by the amount of central bank money minus the amount of central bank money reserves of commercial banks plus the amount of giro deposits of non-banks, i.e. money supply increases total credit supply by the monetary aggregate commonly called M1. Financial intermediation of commercial banks does not increase but decrease total money respectively credit supply, due to the fact that time deposits necessitate the holding of higher central bank money reserves by commercial banks. Consequently, it is only M1 that has the potential to cause inflation but not any other aggregate of M3. I show furthermore that the monetarist differentiation between money and credit is mistaken.

Rethinking the Theory of Money, Credit, and Macroeconomics: A Review Essay

Review of Political Economy, 2020

Money In Modern Macro Models: A Review of the Arguments

Journal of Reviews on Global Economics, 2014

This paper provides an overview of the role of money in modern macro models. In particular, we are focussing on New Keynesian and New Monetarist models to investigate their main findings and most significant shortcomings in considering money properly. As a further step, we ask about the role of financial intermediaries in this respect. In dealing with these issues, we distinguish between narrow and broad monetary aggregates. We conclude that for theoretical as well as practical reasons a periodic review of the definition of monetary aggregates is advisable. Despite the criticism brought forward by the recent New Keynesian literature, we argue that keeping an eye on money is important to monetary policy decision-makers in order to safeguard price stability as well as, as a side-benefit, ensure financial market stability. In a nutshell: money still matters.

The Role of Money in the Monetary Policy: A New Keynesian and New Monetarist Perspective

Environmental, Social, and Governance Perspectives on Economic Development in Asia

In the recent scenario, one of the most pertinent changes in monetary economics has been the virtual disappearance of what was once a dominant focus, the role of money in monetary policy, and in parallel, the disappearance of the LM curve. Economists used to think about issues of monetary policy with the help of the LM curve as being part of the analytical framework which captures the demand for money. However, the workhorse model of modern monetary theory and policy, the New Keynesian Dynamic Stochastic General Equilibrium framework only comprises of, a dynamic aggregate demand (or the dynamic IS) curve, an aggregate supply (or the New Keynesian Phillips) curve, and a monetary policy rule. The monetary policy rule is generally the Taylor rule that relates the nominal interest rate to the output gap and inflation gap, but typically not to either the quantity or the growth rate of money. This change in the modern monetary model reflects how the central banks make monetary policy now. The present study provides a detailed discussion on the role of money in monetary policy formulation, in the context of New Keynesian and New Monetarist perspective. The pros and cons of abandonment of money or the LM curve from monetary policy models have been discussed in detail.

Essays on Money and Credit: A New Monetarist Approach

2010

Daniel R Sanches Chapter 1: Money and Credit with Limited Commitment and Theft Credit contracts and fiat money seem to be robust means of payment in the sense that we observe both monetary exchange and credit transactions under a wide array of technologies and monetary policy rules. However, a common result in a large class of models of money and credit is that the optimal monetary policy --usually the Friedman rule --eliminates any transactions role for credit: money drives credit out of the economy. In this sense, money and credit are not robust in the model. We study the interplay among imperfect recordkeeping, limited commitment, and theft, in an environment that can support both monetary exchange and credit arrangements. Imperfect recordkeeping makes outside money socially useful, but it also permits theft of currency to go undetected, and therefore provides lucrative opportunities for thieves in decentralized exchange. First, we show that imperfect recordkeeping and limited commitment are not sufficient to account for the robust coexistence of money and credit.

The trap of liquidity : analysis and countermeasures following J . M . Keynes

2016

Liquidity is the modern name for money. Originally, it refers to an essential feature of money, rather than to money itself. Money is liquid, as long as it flows from hand to hand, in exchange for goods and services. It is the circulation of money that allows the division of labour and the distribution of its products. Therefore, it is vital that money be liquid, as all substances by which it has been, over the centuries, metaphorically described: like water, blood, and muck. From the very beginning of his enquiry into the nature and functioning of money, Keynes supposes it to be liquid: «Money is only important for what it will procure» (CWK 4: 1). Money is intended to be spent, to circulate, to flow. Money is just a means of exchange. Keynes’s monetary theory follows a long and authoritative tradition, according to which it is indispensable for money to be dispensable (Amato 2015). What is peculiar to Keynes is the observation that this feature of money tends to be denied: «It is ...

Introduction to the Macroeconomic Dynamics Special Issues on Money, Credit, and Liquidity (original) (raw)

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