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A critique of theories of money stock determination

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Author Info
Robert L. Hetzel
Abstract

Many different models of money stock determination exist in the literature. An attempt is made here to understand why the differences in these models arise. Differences in models are ascribed first to the (usually implicit) role assigned to the price level. From this perspective, models fall into two categories. Models in the quantity theory tradition require that the price level adjust in order to cause the real quantity of money to equal the real quantity demanded. In contrast, in the real bills or banking school tradition, the nominal quantity of money adjusts in order to provide the real quantity demanded.

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Paper provided by Federal Reserve Bank of Richmond in its series Working Paper with number 86-06.

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Date of creation: 1986
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Handle: RePEc:fip:fedrwp:86-06

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Keywords: Money ; Money supply ; Monetary theory;

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  1. Pesek, Boris P, 1976. "Monetary Theory in the Post-Robertson "Alice in Wonderland" Era," Journal of Economic Literature, American Economic Association, vol. 14(3), pages 856-84, September. [Downloadable!] (restricted)
  2. Lombra, Raymond & Moran, Michael, 1980. "Policy advice and policymaking at the federal reserve," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 13(1), pages 9-68, January. [Downloadable!] (restricted)
  3. Sivesind, Charles & Hurley, Kevin, 1980. "Choosing an Operating Target for Monetary Policy," The Quarterly Journal of Economics, MIT Press, vol. 94(1), pages 199-203, February.
  4. Michael Dotsey & Robert G. King, 1983. "Monetary Instruments and Policy Rules in a Rational Expectations Environment," NBER Working Papers 1114, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Sargent, Thomas J & Wallace, Neil, 1975. ""Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 241-54, April. [Downloadable!] (restricted)
  6. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August. [Downloadable!] (restricted)
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  7. Matthew B. Canzoneri & Dale W. Henderson & Kenneth S. Rogoff, 1981. "The information content of the interest rate and optimal monetary policy," International Finance Discussion Papers 192, Board of Governors of the Federal Reserve System (U.S.).
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  8. Karl Brunner, 1968. "The role of money and monetary policy," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 8-24. [Downloadable!]
  9. Thomas J. Sargent, 1973. "Rational Expectations, the Real Rate of Interest, and the Natural Rate of Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(1973-2), pages 429-480. [Downloadable!]
  10. Kaminow, Ira, 1977. "Required reserve ratios, policy instruments, and money stock control," Journal of Monetary Economics, Elsevier, vol. 3(4), pages 389-408, October. [Downloadable!] (restricted)
  11. Tinsley, Peter A, et al, 1982. "Policy Robustness: Specification and Simulation of a Monthly Money Market Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 14(4), pages 829-56, November. [Downloadable!] (restricted)
  12. Lyle E. Gramley & Samuel B. Chase, Jr., 1965. "Time deposits in monetary analysis," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 1380-1406. [Downloadable!]
  13. Johannes, James M & Rasche, Robert H, 1981. "Can the Reserves Approach to Monetary Control Really Work?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 13(3), pages 298-313, August. [Downloadable!] (restricted)
  14. Brunner, Karl & Meltzer, Allan H, 1972. "Money, Debt, and Economic Activity," Journal of Political Economy, University of Chicago Press, vol. 80(5), pages 951-77, Sept.-Oct. [Downloadable!] (restricted)
  15. Thomson, Thomas D & Pierce, James L & Parry, Robert T, 1975. "A Monthly Money Market Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 7(4), pages 411-31, November. [Downloadable!] (restricted)
  16. James Tobin, 1963. "Commercial Banks as Creators of 'Money'," Cowles Foundation Discussion Papers 159, Cowles Foundation, Yale University. [Downloadable!]
  17. repec:fip:fedreq:y:1982:i:jan:p:3-16:n:v.68no.1 is not listed on IDEAS
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