Demand Deficiency and Velocity of Money

Journal of Development Economics, 1985

Applied Economics, 1995

This paper attempts to assess empirically the contribuUon of three structural shocks--monetary, institutional (financial and fiscal), and technological--to output and velocity fluctuaUons in the naUonal bank era and the post-1973 period. To idenUfy these shocks we impose only long-run restrictions, derived from a monetary growth model. We find that higher money growth increases (decreases) velocity in the first (second) period, depending crucially on the resulUng changes in the transacUons frequency. Credi t-enhancing financial or expansionary fiscal shocks have a permanent posiUve effect on velocity and a hump-shaped effect on output, whereas technological shocks cause velocity to decrease in the short run and output to move to a permanently higher level.

1996

Economia, Societa', e Istituzioni, 2007

The paper studies the concept of utility of money. The latter is defined as the ability to generate additional income. Utility of money is maximized by equalizing dynamic marginal utility of money and marginal cost. The subsequent differential equation links up income velocity of money acceleration and equilibrium convergence. It is proved that individuals' utility of money maximization objectives may be aggregated at macro level and can be used for monetary policy optimization. Lagrangian multipliers technique is applied to obtain a relationship between income velocity of money and some supplementary constraints. The paper also makes distinction between short term and long-term utility of money. Conclusions about different types of monetary policies are derived. The Appendix establishes connections with production and investment on the basis of optimal control technique. JEL: E00, E31, E51

Money supply in a no-growth economy, 2019

In economic circles a debate has been going on for a while now: does the current monetary system have an embedded growth imperative? Several papers have been published on the topic and the conclusions differ. The premise of this paper is that, theoretically, it is indeed possible to have a no-growth economy with a debt based, interest bearing monetary system but that the conditions needed for it to become reality are impossible to implement. The first part of the paper presents a study of the conclusions of previous papers with a focus on the necessary conditions for a no-growth economy to work with a debt based, interest bearing monetary system. The second part introduces an aggregated, stock and flow consistent computational and parameterisable model of the current monetary system under the monetary policies currently active in the EU. This model is then used to simulate money supply under the different conditions brought forward by the previous papers. These conditions are subjected to research from behavioural fields in order to determine the plausibility of implementing them in the real world. The third part introduces an alternative monetary system which does not need such strict conditions in order to remain stable in a no-growth economy.

Journal of Asian Economics, 1994

This paper reports an econometric study of China's money demand relation, particularly for the period of the economic reforms. With respect to economic theory, two more factors representing transaction demand, additional to the commonly-used GDP or national income, are introduced: the ratio of the growth rates of total savings and loans, to capture the special feature of a centrally planned economy (CPE), and a monetization index to approximate the transitional feature of China's economic reforms. With respect to econometric methods, the general+simple dynamic specification modelling approach is adopted to help search for relatively constant relations, using both quarterly data for the period 1978Ql-199144 and annual data for the period 1952-1991. The main findings are: (1) A relatively constant relation of money demand can be found, in spite of the considerable economic changes during the reforms; (2) The constancy is sustained by both the usual market variables, such as GDP and interest rate, and variables characterizing CPEs as well as the reform process; (3) The money demand relation will move towards a standard one in the long run, once the market system dominates; (4) Post-model forecast for 1992 renders satisfactory results; (5) The modelling results support further theoretical and policy studies of transitional economies from central planning towards market. (JEL E41,053, P21) China's banking system played a totally subordinate role in the material balancing mechanism of the centrally planned economy (CPE) prior to the economic reforms. The reforms have brought about gradual separation of fiscal and monetary policies, and brought to the limelight issues concerning the use of monetary instruments in macroeconomic management among Chinese economists and government policy makers. They have debated a great deal, during the last few years, upon the role of monetary policies in the rapid expansion of the aggregate demand. More specifically, their discussions are centered around the causality between money and inflation, and their views are roughly divided between those who regard the increase of money supply in excess of the economic growth as the main cause (e.g., and those who disapprove of the existence of independent monetary policy and ascribe

2008

The purpose of this paper is to estimate the money demand function of Cagan (1956) using a panel data set covering 27 countries with different economic levels over the period 1988-98. The static fixed effects and the dynamic fixed effects reveal that a money demand equation exists. However, in contrast to the theory proposed by Cagan, estimates of the output elasticity of money demand are in the range from 0.18 to 0.20.

Journal of Macroeconomics, 1993

Journal of Development Economics, 1987

An empirical analysis of money demand behavior in Sudan is presented, based on the dynamic error-correction model. A theoretical basis for the model is offered, which allows an explicit, parameterized division of effects into long-run influences, short-term adjustments, and proportional equilibrium conditions. We refute previous claims that income and price effects may be abnormally high in Sudan, in part by accounting for both foreign exchange and inflationary influences. *The authors would like to thank Pekka Ahtiala, Patrick Clawson, and two anonymous referees for helpful comments. Work by the first author was supported by NSF grant SES-8410630. This paper was written while the second author was visiting the Economics Department at Northwestern University. IA small number of studies have been directed at the empirical relationship between money and growth; see Khan and Knight (1981) for a brief overview and an estimated logarithmic partial-adjustment model for money demand using pooled data for several countries. 2For a general discussion, see Khan and Knight (1981).