DOCSLIB.ORG

Money Demand ECON 40364: Monetary Theory & Policy

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Money Demand ECON 40364: Monetary Theory & Policy Money Demand ECON 40364: Monetary Theory & Policy Eric Sims University of Notre Dame Fall 2017 1 / 37 Readings I Mishkin Ch. 19 2 / 37 Classical Monetary Theory I We have now defined what money is and how the supply of money is set I What determines the demand for money? I How do the demand and supply of money determine the price level, interest rates, and inflation? I We will focus on a framework in which money is neutral and the classical dichotomy holds: real variables (such as output and the real interest rate) are determined independently of nominal variables like money I We can think of such a world as characterizing the \medium" or \long" runs (periods of time measured in several years) I We will soon discuss the \short run" when money is not neutral 3 / 37 Velocity and the Equation of Exchange I Let Yt denote real output, which we can take to be exogenous with respect to the money supply I Pt is the dollar price of output, so Pt Yt is the dollar value of output (i.e. nominal GDP) I Define velocity as as the average number of times per year that the typical unit of money, Mt , is spent on goods and serves. Denote by Vt I The \equation of exchange" or \quantity equation" is: Mt Vt = Pt Yt I This equation is an identity and defines velocity as the ratio of nominal GDP to the money supply 4 / 37 From Equation of Exchange to Quantity Theory I The quantity equation can be interpreted as a theory of money demand by making assumptions about velocity I Can write: 1 Mt = Pt Yt Vt I Monetarists: velocity is determined primarily by payments technology (e.g. credit cards, ATMs, etc) and is therefore close to constant (or at least changes are low frequency and therefore predictable) −1 I Let k = Vt and treat it as constant. Since money demand, d Mt , equals money supply, Mt , our money demand function is: d Mt = kPt Yt I Money demand proportional to nominal income; k does not depend on things like interest rates I This is called the quantity theory of money 5 / 37 Money and Prices I Take natural logs of equation of exchange: ln Mt + ln Vt = ln Pt + ln Yt I If Vt is constant and Yt is exogenous with respect to Mt , then: d ln Mt = d ln Pt I In other words, a change in the money supply results in a proportional change in the price level (i.e. if the money supply increases by 5 percent, the price level increases by 5 percent) 6 / 37 Money and Inflation I Since the quantity equation holds in all periods, we can first difference it across time: (ln Mt − ln Mt−1) + (ln Vt − ln Vt−1) = (ln Pt − ln Pt−1) + (ln Yt − ln Yt−1) I The first difference of logs across time is approximately the growth rate I Inflation, pt , is the growth rate of the price level I Constant velocity implies: M Y pt = gt − gt I Inflation is the difference between the growth rate of money and the growth rate of output I If output growth is independent of the money supply, then inflation and money growth ought to be perfectly correlated 7 / 37 8 / 37 9 / 37 10 / 37 Nominal and Real Interest Rates I The nominal interest rate tells you what percentage of your nominal principal you get back (or have to pay back, in the case of borrowing) in exchange for saving your money. Denote by it I There are many interest rates, differing by time to maturity and risk. Ignore this for now. Think about one period interest rates { i.e. between t and t + 1 I The real interest rate tells you what percentage of a good you get back (or have to pay back, in the case of borrowing) in exchange for saving a good. Denote by rt I Putting one good in the bank ) Pt dollars in bank ) (1 + i )P dollars tomorrow ) purchases (1 + i ) Pt goods t t t Pt+1 tomorrow 11 / 37 The Fisher Relationship I The relationship between the real and nominal interest rate is then: Pt 1 + rt = (1 + it ) Pt+1 I Since the inverse of the ratio of prices across time is the expected gross inflation rate, we have: 1 + it 1 + rt = e 1 + pt+1 e I Here pt+1 is expected inflation between t and t + 1 I Approximately: e rt = it − pt+1 12 / 37 The Natural Rate of Interest I Over the medium to long run, the real interest rate is an equilibrium construct which balances the supply and demand for savings and investment I We sometimes refer to this as the \natural rate of interest" after Knut Wicksell I Simple theory based on the consumption Euler equation with log utility: Ct+1 P = b(1 + rt ) Ct P I r is the natural rate of interest, or the real interest rate consistent with \potential output." Take logs, approximate, and treat consumption growth as equal to output growth: P Y rt = gt+1 − ln b I Intuition based on supply and demand for savings and investment 13 / 37 Money, Inflation, and Interest Rates I Over the medium to long run, the natural rate of interest just depends on output growth and attitudes about saving, captured by b. Independent of monetary factors. Think of this as constant. I Over the medium to long run, we should also expect expected e inflation to equal realized inflation, pt+1 = pt I From the Fisher relationship, this means that nominal interest rates and inflation ought to move together 14 / 37 16 14 Correlation = 0.74 1981 12 1980 1982 10 1979 1984 1983 8 1989 1974 19851990 1973 1978 1988 19691970 6 198620001987 1975 1995 1991 1968 1977 19971996 1976 19981999 19662006 199420071967 1971 4 1965 1972 1964 1959 20011992 1957 Three Month Treasury Bill Rate 1963 2005 19621960 1993 1961 1956 2 19551958 200220082004 2003 0 20092015201020162013201420122011 0 2 4 6 8 10 Inflation Rate 15 / 37 Problems with the Quantity Theory I The quantity theory seems to provide a pretty good theory of inflation and interest rates over the medium to long run I What about the short run? I Problems with the quantity theory: I The shorter term relationships between money growth and both inflation and nominal interest rates are weak I Velocity is not constant and has become harder to predict, particularly since the early 1980s 16 / 37 17 / 37 18 / 37 19 / 37 20 / 37 Moving Beyond the Quantity Theory I The key assumption in the quantity theory is that the demand for money (i.e. velocity) is stable (or at least predictable) I Doesn't seem to be the case, particularly in last several decades I Liquidity preference theory of money demand posits that the demand for real money balances, m = Mt , is an increasing t Pt function of output, Yt , but a decreasing function of the nominal interest rate, it : Mt = L(it , Yt ) Pt − + I But then velocity: Pt Yt Yt Vt = = Mt L(it , Yt ) 21 / 37 Money in the Utility Function I Suppose that there is a representative household who receives utility from consuming goods and holding real money balances, m = Mt . Flow utility: t Pt Mt Mt U Ct , = ln Ct + y ln Pt Pt I Flow budget constraint: Pt Ct + Bt − Bt−1 + Mt − Mt−1 ≤ Pt Yt − Pt Tt + it−1Bt−1 I Bt−1 and Mt−1: stocks of bonds and money household enters t with I Both enter as stores of value. Difference being that bonds pay interest I Household discounts future utility flows by b 2 [0, 1) 22 / 37 Optimality Conditions I Plugging constraints in and taking derivatives yields: 1 1 Pt = bEt (1 + it ) Ct Ct+1 Pt+1 Pt 1 1 Pt y = − bEt Mt Ct Ct+1 Pt+1 I Government's budget constraint with Gt = 0 (similar to above): Pt Tt = (1 + it )BG,t−1 − BG,t − (Mt − Mt−1) I Market-clearing: BG,t = Bt , so Ct = Yt 23 / 37 Money Demand Function I Making use of market-clearing and combining the FOC yields: −1 1 it ymt = Yt 1 + it I Re-arranging: 1 + it mt = yYt it I Demand for real balances: (i) increasing in Yt , (ii) decreasing in it I Zero lower bound: must have it ≥ 0 to get non-negative real balances. At it ! 0, demand for real balances goes to infinity 24 / 37 Baumol-Tobin I You need to spend Y over the course of a period (say, a year) I You keep wealth in the bank earning nominal interest it I You need to determine how many trips you take to bank I Each trip incurs a cost (\shoeleather cost") of K I Let mt denote average real balances holdings over the period. Opportunity cost of holding money is it mt I Each time you withdraw money, you withdraw 2mt dollars. Total trips to bank is Y 2mt I Objective is to pick mt to minimize: Y min it mt + K mt 2mt 25 / 37 Money Demand Function I Use calculus to get first order condition: r KYt mt = 2it I Or re-arranging: 1 KY 2 − 1 m = t i 2 t 2 t I Demand for real balances again increasing in Yt and decreasing in it I There is again a zero lower bound: it ≥ 0 for demand for real balances to be positive 26 / 37 Friedman Rule I Milton Friedman argued that optimal monetary policy in the medium to long run would target a nominal interest rate of zero I With a positive natural rate of interest, this would require deflation I Basic intuition: a positive nominal interest rates dissuades people from holding money by increasing the opportunity cost of liquidity relative to bonds, whereas the marginal cost of producing (fiat) money is essentially zero I At a social optimum, want to equate private cost of holding money (interest rate) to the public cost of producing money (zero) I Holds in both the MIU model (i = 0 maximizes utility) and the B-T model (i = 0 minimizes the cost of holding money) I Why don't central banks follow Friedman rule? Because of the zero lower bound and short run stabilization policy I Does help us understand desire for low interest rates, however 27 / 37 Optimality of i = 0 MIU Model B-T Model 2 4 1.5 m 3 Y 2 K m n + l 1 2 A m " 0.5 i 1 0 0 0 2 4 6 0 2 4 6 i i 28 / 37 Instability of Velocity: Movement Away from Focusing on Monetary Aggregates I Paul Volcker and the Fed experimented with targeting monetary aggregates in the early 1980s I This brought inflation down from the 1970s, but led to high and variable interest rates I Most monetary economists concluded that the demand for money is not in fact stable, i.e.
Load more

Recommended publications
  • The Origins of Velocity Functions
    The Origins of Velocity Functions Thomas M. Humphrey ike any practical, policy-oriented discipline, monetary economics em- ploys useful concepts long after their prototypes and originators are L forgotten. A case in point is the notion of a velocity function relating money’s rate of turnover to its independent determining variables. Most economists recognize Milton Friedman’s influential 1956 version of the function. Written v = Y/M = v(rb, re,1/PdP/dt, w, Y/P, u), it expresses in- come velocity as a function of bond interest rates, equity yields, expected inflation, wealth, real income, and a catch-all taste-and-technology variable that captures the impact of a myriad of influences on velocity, including degree of monetization, spread of banking, proliferation of money substitutes, devel- opment of cash management practices, confidence in the future stability of the economy and the like. Many also are aware of Irving Fisher’s 1911 transactions velocity func- tion, although few realize that it incorporates most of the same variables as Friedman’s.1 On velocity’s interest rate determinant, Fisher writes: “Each per- son regulates his turnover” to avoid “waste of interest” (1963, p. 152). When rates rise, cashholders “will avoid carrying too much” money thus prompting a rise in velocity. On expected inflation, he says: “When...depreciation is anticipated, there is a tendency among owners of money to spend it speedily . the result being to raise prices by increasing the velocity of circulation” (p. 263). And on real income: “The rich have a higher rate of turnover than the poor. They spend money faster, not only absolutely but relatively to the money they keep on hand.
    [Show full text]
  • Monetary Regimes, Money Supply, and the US Business Cycle Since 1959 Implications for Monetary Policy Today
    Monetary Regimes, Money Supply, and the US Business Cycle since 1959 Implications for Monetary Policy Today Hylton Hollander and Lars Christensen MERCATUS WORKING PAPER All studies in the Mercatus Working Paper series have followed a rigorous process of academic evaluation, including (except where otherwise noted) at least one double-blind peer review. Working Papers present an author’s provisional findings, which, upon further consideration and revision, are likely to be republished in an academic journal. The opinions expressed in Mercatus Working Papers are the authors’ and do not represent official positions of the Mercatus Center or George Mason University. Hylton Hollander and Lars Christensen. “Monetary Regimes, Money Supply, and the US Business Cycle since 1959: Implications for Monetary Policy Today.” Mercatus Working Paper, Mercatus Center at George Mason University, Arlington, VA, December 2018. Abstract The monetary authority’s choice of operating procedure has significant implications for the role of monetary aggregates and interest rate policy on the business cycle. Using a dynamic general equilibrium model, we show that the type of endogenous monetary regime, together with the interaction between money supply and demand, captures well the actual behavior of a monetary economy—the United States. The results suggest that the evolution toward a stricter interest rate–targeting regime renders central bank balance-sheet expansions ineffective. In the context of the 2007–2009 Great Recession, a more flexible interest rate–targeting
    [Show full text]
  • 5. Monetary Policy and Monetary Reform: Irving Fisher’S Contributions to Monetary Macroeconomics
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Loef, Hans E.; Monissen, Hans G. Working Paper Monetary policy and monetary reform: Irving Fisher's contributions to monetary macroeconomics W.E.P. - Würzburg Economic Papers, No. 11 Provided in Cooperation with: University of Würzburg, Chair for Monetary Policy and International Economics Suggested Citation: Loef, Hans E.; Monissen, Hans G. (1999) : Monetary policy and monetary reform: Irving Fisher's contributions to monetary macroeconomics, W.E.P. - Würzburg Economic Papers, No. 11, University of Würzburg, Department of Economics, Würzburg This Version is available at: http://hdl.handle.net/10419/48451 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu W. E. P. Würzburg Economic Papers Nr.
    [Show full text]
  • The Classical Equation of Exchange As It Is Applied Today Equates The
    Copyrighted Material quantity theory of money hold even less of it than they did before the infla- The classical equation of exchange as it is applied tionary process began. There is, in fact, an exact in- today equates the money supply multiplied by the verse relationship between the proportion of income velocity of circulation (the number of times the av- held as money and the velocity of circulation with, erage currency unit changes hands in a given year) say, a halving of average money holdings requiring with the economy’s gross domestic product (the that the currency circulate at double the old rate in quantity of output produced multiplied by the price order to buy the same goods as before. In the extreme level). Although the American economist Irving case of ‘‘hyperinflation’’ (broadly defined as inflation Fisher originally included transactions of previously exceeding 50 percent per month), money holdings produced goods and assets as part of the output plunge and the inflation rate significantly outstrips measure, only newly produced goods are included in the rate of money supply growth. Conversely, under present-daycalculationsof grossdomestic product.If deflation, velocity is likely to fall: people hold onto the velocity of circulation and output are both con- their money longer as they recognize that the same stant, there is a one-to-one relationship between a funds will buy more goods and services over time if change in the money supply and a change in prices. prices continue to decline. Thus money demand rises This yields a ‘‘quantity theory of money’’ under as money supply falls, again exaggerating the effects which a doubling of the money supply must be ac- of the money supply change on the aggregate price companied by a doubling of the price level (or, when level.
    [Show full text]
  • The Future of Money and of Monetary Policy
    Laurence H Meyer: The future of money and of monetary policy Remarks by Mr Laurence H Meyer, Member of the Board of Governors of the US Federal Reserve System, at the Distinguished Lecture Program, Swarthmore College, Swarthmore, Pennsylvania, 5 December 2001. The references for the speech can be found on the website of the Board of Governors of the US Federal Reserve System. * * * Money and the payment system have evolved over time. The earliest forms of money were commodities, such as cattle and grain, that came to be used as means of payment and stores of value, two properties that effectively define money. Over time, precious metals, specifically silver and gold, became dominant forms of payment. From the 1870s to World War I and, in some cases, into the Great Depression, many nations backed their currencies with gold. Later, fiat money--currency and coin issued by the government but not backed by any commodity--became the dominant form of money, along with deposits issued by banks. What has driven this evolution of money, and what is the future of money? This is the first set of questions that motivate this lecture. Money also provides a metric for the measurement of prices. That is, once you have defined the unit of exchange, you can measure the price of any other item in terms of that unit. Money is also obviously related to monetary policy. Another theme of the lecture is the relationship between the nature of money, the scope for changes in the overall level of prices, and constraints on or opportunities for discretionary monetary policy.
    [Show full text]
  • The Monetary Policy Effects of Sweden's Transition Towards A
    The Monetary Policy Effects of Sweden’s Transition Towards a Cashless Society: An Econometric Analysis Therése Dalebrant Honors Thesis in Economics Advisor: Professor Steven Wood University of California, Berkeley Department of Economics May 2016 1 Contents Page I. Introduction………………………………………………………………………...3 II. The Swedish Payment System and the Riksbank…………………………...……..3 III. Cost and Benefits of a Cashless Society…….……………………………………..8 IV. Monetary Policy Implications of a Cashless Society …………………………....12 V. Monetary Aggregates and the Quantity Theory of Money……………………….16 VI. Data……………………………………………………………………………….24 VII. Econometric Methodology…………………..……………………………….…..24 VIII. Estimation Results………………………………………………………………..27 IX. Conclusion……………………………………………………………………….36 X. References……………………………………………………………………….38 Abstract: Sweden is predicted to become one of the world’s first cashless societies. This will affect the Swedish economy in many ways, including the role of the Swedish central bank. The benefits to society are predicted to outweigh the costs, due to increased efficiency in the payment system and reduced transaction costs. Moreover, the ability of the Riksbank to carry out monetary policy will not be negatively affected. In contrast, the power of the Riksbank to control the economy may increase at the zero lower bound with less cash in circulation. I would like to sincerely thank my advisor Professor Steven Wood for his guidance, support, and time spent helping me throughout this research process. His help has been extremely valuable both in terms of completing my thesis and for my own personal development as a student. I would also like to thank Professor Roger Craine for his guidance when setting up my econometric model and for his professional insights regarding monetary policy. 2 I.
    [Show full text]
  • 4 How Fast Is That Buck? the Velocity of Money
    4 How fast is that buck? The velocity of money How often does a dollar bill change hands? This quantity, known as the velocity of money, is relevant because it influences inflation: higher velocity of money has the same effect as an increase in the quantity of money; if money works harder, you need less of it (see inset). The relativity of money Economics has its own version of Einstein’s E=MC2. It is Irving Fisher’s equation of exchange: Here M denotes the total money supply, V the velocity of money, P the price level and T the amount of transactions. The formula is simple and intuitively appealing, but estimating the actual values for these variables is not straightforward, to put it mildly. Perhaps the most enigmatic of all is V, the velocity of money: how often does a dollar or euro change hands? We can rewrite Fisher’s equation to , but while M is measurable, PT is much harder to obtain. We measure changes to P through price level indices, but for the formula we need the value of all transactions, i.e. the average price times the volume of all transactions, including intermediate goods and asset transactions. One way to estimate the speed of cash is to look directly at consumer cash behaviour. A Federal Reserve survey, for example, that finds that physical currency turns over 55 times per year, i.e. about once a week.1 We can combine this with data on banknote fitness and replacement by the Federal Reserve. The Federal Reserve inspects notes returned by banks and replaces the ones that are worn out.
    [Show full text]
  • Watching Nominal GDP Strider Elass – Economist
    July 1st, 2013 630-517-7756 • www.ftportfolios.com Brian S. Wesbury – Chief Economist Robert Stein, CFA – Dep. Chief Economist Watching Nominal GDP Strider Elass – Economist One of the most important foundations of modern Nominal GDP is up at a nearly 4% annual rate the past two macroeconomics is something called the “equation of years. As a result, we can say with some certainty that exchange.” It dates all the way back to John Stuart Mill but, in monetary policy must be accommodative. This is confirmed by the past couple of generations, was popularized by free-market a near zero federal funds rate and a relatively steep yield curve icon Milton Friedman. – meaning a wide spread between long- and short-term interest It’s really quite simple: M*V = P*Q. And what it means is rates. In addition, the “real” (inflation-adjusted) federal funds that the amount of money multiplied by the velocity with which rate has been negative for almost four years (average -0.7% for it circulates through the economy determines nominal GDP the past decade). (real GDP multiplied by the price level). For example, if the All of this signals monetary policy is loose. As a result, money supply increases and velocity stays the same (or rises), barring some unforeseen drop in velocity, we are forecasting an then nominal GDP will also increase, meaning more real GDP, upward trend in nominal GDP growth over at least the next higher prices, or some combination of the two. couple of years. In turn, as nominal GDP accelerates, the This is true regardless of a country’s monetary system.
    [Show full text]
  • Macroeconomics: Theories and Policies Ii (Eco2c06)
    School of Distance Education MACROECONOMICS: THEORIES AND POLICIES II (ECO2C06) STUDY MATERIAL II SEMESTER CORE COURSE MA ECONOMICS (2019 Admission ONWARDS) UNIVERSITY OF CALICUT SCHOOL OF DISTANCE EDUCATION Calicut University P.O, Malappuram Kerala, India 673 635. 190306 Macro Economics : Theories and Policies II Page 1 School of Distance Education UNIVERSITY OF CALICUT SCHOOL OF DISTANCE EDUCATION STUDY MATERIAL SECOND SEMESTER MA ECONOMICS (2019 ADMISSION) CORE COURSE : ECO2C06 : MACROECONOMICS : THEORIES AND POLICIES II Prepared by : SUJIN K N, Assistant Professor, PG & Research Department of Economics, Government College, Kodanchery, Kozhikode - 673 580. Scrutinized by : Dr.K.X Joseph, Professor (Retd.), Dr.John Matthai Centre, Thrissur. Macro Economics : Theories and Policies II Page 2 School of Distance Education CONTENTS I Classical Vs Keynes 5 II Monetarism 79 New Classical Macro Economics, Real III Business cycle School and Supply side 93 Economics IV The New Keynes School 126 V New Political Macroeconomics 151 Macro Economics : Theories and Policies II Page 3 School of Distance Education Macro Economics : Theories and Policies II Page 4 School of Distance Education MODULE I CLASSICAL VS KEYNES “Economics is an easy subject in which few excel”-- John Maynard Keynes INTRODUCTION TO MACROECONOMICS Macro economics is the branch of economics studying the behaviour of the aggregate economy – at the regional, national or international level. In other words Macroeconomics is the study of the behavior of the whole economy or economy as a whole. It is concerned with the determination of the broad aggregates in the economy, in particular the national output, unemployment, inflation and the balance of payments position.
    [Show full text]
  • Precursors of the P-Star Model
    PRECURSORSOFTHEP-STARMODEL Thomas M. Hump&y Because the price level rises by a lesser extent than squired for long-mn equikhium during the initial period of higher money growth, th price level has some catching up to do to reflect the higher rate of money growth. The rate of price change-the inflation rate-will thereforebe above the long-ma rate during this phase of the adj,stnzent. Wiliarn Poole, Money and the Economy: A Monetarist View, p. 95. Introduction quantity theory of money with the observed empirical fact of lagged price adjustment into a predictive model The quotation states economists whose major components have existed for at least have observed: Prices, to their lag 230 years. Every economist who ever believed (1) in to unanticipated changes, must that the long-term trend of prices is roughly deter- rise at faster-than-equilibrium pace mined by money per unit of full-capacity real out- they are reach their equilibrium level put, (2) that actual prices adjust to this trend with sistent with monetary change. analysts a lag, and (3) that during the process of adjustment at Board of of the Reserve such prices will be rising faster (or slower) than their System embodied this into their trend rate of change qualifies as a P-Star proponent. inflation forecasting the P-Star Besides giving these ideas a catchy name, the Board so-called because refers to equilibrium level has condensed them into an econometric equation to which prices P to adjust.’ that tracks inflation well. But the ideas themselves the gap discrepancy between and have a long tradition in mainstream monetary theory.
    [Show full text]
  • Why Money Matters: Lessons from a Half-Century of Monetary Theory Author(S): Paul Davidson Source: Journal of Post Keynesian Economics, Vol
    Why Money Matters: Lessons from a Half-Century of Monetary Theory Author(s): Paul Davidson Source: Journal of Post Keynesian Economics, Vol. 1, No. 1 (Autumn, 1978), pp. 46-70 Published by: Taylor & Francis, Ltd. Stable URL: http://www.jstor.org/stable/4537459 Accessed: 20-04-2018 16:54 UTC JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at http://about.jstor.org/terms Taylor & Francis, Ltd. is collaborating with JSTOR to digitize, preserve and extend access to Journal of Post Keynesian Economics This content downloaded from 189.6.19.245 on Fri, 20 Apr 2018 16:54:21 UTC All use subject to http://about.jstor.org/terms PAUL DAVIDSON Why money matters: lessons from a half-century of monetary theory Years ago, Dennis Robertson (1956, p. 81) uttered the following witticism about economic doctrine: "Now, as I have often pointed out to my students, some of whom have been brought up in sporting circles, high-brow opinion is like a hunted hare; if you stand in the same place, or nearly the same place, it can be relied upon to come round to you in a circle." In the past half-century, the role, importance, and functions of money in the economy have been the "hunted hare" in monetary theory.
    [Show full text]
  • From Overlapping Generations to Infinite-Lived Agent Models
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Assous, Michaël; Duarte, Pedro Garcia Working Paper Challenging Lucas: From overlapping generations to infinite-lived agent models CHOPE Working Paper, No. 2017-05 Provided in Cooperation with: Center for the History of Political Economy at Duke University Suggested Citation: Assous, Michaël; Duarte, Pedro Garcia (2017) : Challenging Lucas: From overlapping generations to infinite-lived agent models, CHOPE Working Paper, No. 2017-05, Duke University, Center for the History of Political Economy (CHOPE), Durham, NC This Version is available at: http://hdl.handle.net/10419/155468 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu Challenging Lucas: from overlapping generations to infinite-lived agent models by Michaël Assous and Pedro Garcia Duarte CHOPE Working Paper No.
    [Show full text]