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On the Endogeneity of Money Supply

In: Nicholas Kaldor and Mainstream Economics

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  • J. Tobin

Abstract

Nicholas Kaldor gave superb testimony on monetarism to the Select Parliamentary Committee in 1980. There and elsewhere, he effectively criticized Milton Friedman’s empirical claims that Money causes Nominal Income. One of his criticisms was essentially econometric, namely that Friedman was using as evidence correlations over periods when central bank policies were accommodative. That is, the authorities were deliberately allowing money stocks to respond to income variations. Such correlations could not indicate what would have happened if the central banks had not been accommodative.1 Kaldor was surely right in making this econometric point. Of course, the fact that Friedman’s correlations don’t prove his case does not support any other proposition about the effects of non-accommodative policy.

Suggested Citation

  • J. Tobin, 1991. "On the Endogeneity of Money Supply," Palgrave Macmillan Books, in: Edward J. Nell & Willi Semmler (ed.), Nicholas Kaldor and Mainstream Economics, chapter 12, pages 221-224, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-10947-0_12
    DOI: 10.1007/978-1-349-10947-0_12
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    Cited by:

    1. Giuseppe Fontana & Ezio Venturino, 2003. "Endogenous Money: An Analytical Approach," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(4), pages 398-416, September.
    2. Ridhwan, M.M. & Nijkamp, P. & Rietveld, P., 2008. "Regional development and monetary policy : a review of the role of monetary unions, capital mobility and locational effects," Serie Research Memoranda 0007, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.

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