This book sets out to provide a scholarly analysis of money and capital, the institutional economic class interests that exist in Ireland, and alternatives to same in the spheres of paid labour and ...social reproduction. In essence it is a political work in that it picks a side in the debate over these issues.
The quantity theory of money hypothesizes that the price level is determined through the equilibration of money supply and demand. Predicated on this causal structure, a single-equation error ...correction model decomposes from a larger vector autoregressive system so as to make available bounds tests for a levels relationship that are robust to the univariate integration properties of the variables. This model is estimated using three monetary aggregates and two money demand specifications, for U.S. and U.K. annual data over the past century and quarterly post-WWII data. The classic homogeneity propositions of the quantity theory are testable, and are found to be most compatible with U.S. annual M2 using log-log money demand with structural change permitted. Nevertheless, the resulting welfare costs are similar to those yielded by the U.K. annual data, being less than one percent of GDP at interest rates experienced during the past century.
The COVID‐19 crisis has revived an old heated debate on whether significant increases in the money supply ultimately lead to higher inflation. Some observers have alluded to the quantity theory of ...money for that purpose, though in our view, this has sometimes been in a misleading way. Against this background, this paper seeks to clarify several aspects of the quantity theory of money, which are useful to apply it fairly in the current world. First, we review the meaning of the velocity term in the quantity equation. We argue that it has no relevance as a behavioural concept: there is no such thing as a 'desired velocity'. Rather, income velocity should be seen as a variable deriving from a system of parameters and variables related to money demand, as the monetarist approach clearly puts it, with no intrinsic relevance. Second, we clarify the practical relevance that the quantity theory approach can bear in the 21st century. Third, we review the channels and assumptions underlying the asserted quantity theory link between money growth and inflation. In light of our analysis, we conclude that the high money growth rates seen since the pandemic outbreak are unlikely to translate into higher inflation rates.
More than 50 years ago, Friedman and Schwartz examined historical data for the United States and found evidence of procyclical movements in the money stock, which led corresponding movements in ...output. We find similar correlations in more recent data; these appear most clearly when Divisia monetary aggregates are used in place of the Federal Reserve's official, simple-sum measures. When we use information in Divisia money to estimate a structural vector autoregression, identified monetary policy shocks appear to have large and persistent effects on output and prices, with a lag that has lengthened considerably since the early 1980s.
•A generic model of money and liquidity with liquidity bubbles and seignorage rents.•Conditions for the equivalence of public and private money.•Applications to the “Chicago Plan,” cryptocurrencies, ...the Indian de-monetization experiment, and Central Bank Digital Currency (CBDC).•CBDC need not undermine financial stability.
When does a swap between private and public money leave the equilibrium allocation and price system unchanged? To answer this question, the paper sets up a generic model of money and liquidity which identifies sources of seignorage rents and liquidity bubbles. We derive sufficient conditions for equivalence and apply them in the context of the “Chicago Plan”, cryptocurrencies, the Indian de-monetization experiment, and Central Bank Digital Currency (CBDC). Our results imply that CBDC coupled with central bank pass-through funding need not imply a credit crunch nor undermine financial stability.
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