Advanced Search
MyIDEAS: Login to save this paper or follow this series

Informedness Of Economic Agents And The Quantity Theory Of Money

Contents:

Author Info

  • Stanley C. W. Salvary

Abstract

Historically, informedness of economic agents via price stability has been a rationale for the money supply rule derived from the Quantity Theory of Money. The monetarists maintain that changes in the price level are attributable to the level of the money supply; hence, a money supply rule is adopted as the means to curb inflation. Given the adopted monetary policy, agents are informed of expected price level changes. From a relativist perspective, in the absence of monetary dislocation or revaluation, this paper maintains that changes in the general price level are attributable to the net effect of the realignment of relative prices. If as posited that changes in the general level of prices are not a function of changes in the supply of money but of changes in the composition of aggregate demand and supply, then the money supply rule for monetary policy would be ineffective at best and disruptive at worst. Apart from adverse financial impacts on business, the .quantity theory. inflation-designed short term interest rate policy has induced several significant negative effects on the capital markets in 1987 and in 2006. Apparently, economic agents are better informed under the relativist approach than under the monetarist approach.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://128.118.178.162/eps/mac/papers/0512/0512005.pdf
Download Restriction: no

Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0512005.

as in new window
Length: 27 pages
Date of creation: 07 Dec 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0512005

Note: Type of Document - pdf; pages: 27
Contact details of provider:
Web page: http://128.118.178.162

Related research

Keywords: price instability; monetary policy; monetary authority; price signalling; fiscal policy; the endogeneity of money; the money supply; the rate of inflation; nominal interest rates; the velocity of money; repudiation of paper money; the supply of credit; 'fully informed agents'.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. David F. Hendry & Neil R. Ericsson, 1989. "An econometric analysis of UK money demand in MONETARY TRENDS IN THE UNITED STATES AND THE UNITED KINGDOM by Milton Friedman and Anna J. Schwartz," International Finance Discussion Papers 355, Board of Governors of the Federal Reserve System (U.S.).
  2. Boudoukh, Jacob & Richardson, Matthew & Whitelaw, Robert F, 1994. " Industry Returns and the Fisher Effect," Journal of Finance, American Finance Association, vol. 49(5), pages 1595-1615, December.
  3. Alan S. Blinder, 1999. "Central Banking in Theory and Practice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522608, December.
  4. Poole, William, 1988. "Monetary Policy Lessons of Recent Inflation and Disinflation," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 73-100, Summer.
  5. Bruce D. Smith, 1985. "American Colonial Monetary Regimes: The Failure of the Quantity Theory and Some Evidence in Favour of an Alternative View," Canadian Journal of Economics, Canadian Economics Association, vol. 18(3), pages 531-65, August.
  6. Laidler, David, 1989. "Dow and Saville's Critique of Monetary Policy--A Review Essay," Journal of Economic Literature, American Economic Association, vol. 27(3), pages 1147-59, September.
  7. Evans, Martin D D & Lewis, Karen K, 1995. " Do Expected Shifts in Inflation Affect Estimates of the Long-Run Fisher Relation?," Journal of Finance, American Finance Association, vol. 50(1), pages 225-53, March.
  8. Spindt, Paul A, 1985. "Money Is What Money Does: Monetary Aggregation and the Equation of Exchange," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 175-204, February.
  9. Marshall, David A, 1992. " Inflation and Asset Returns in a Monetary Economy," Journal of Finance, American Finance Association, vol. 47(4), pages 1315-42, September.
  10. Davidson, Paul, 1972. "Money and the Real World," Economic Journal, Royal Economic Society, vol. 82(325), pages 101-15, March.
  11. Hicks, J. R., 1979. "Critical Essays in Monetary Theory," OUP Catalogue, Oxford University Press, number 9780198284239, September.
  12. Hoover, Kevin D, 1984. "Two Types of Monetarism," Journal of Economic Literature, American Economic Association, vol. 22(1), pages 58-76, March.
  13. Meltzer, Allan H, 1977. "Anticipated Inflation and Unanticipated Price Change: A Test of the Price-Specie Flow Theory and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 9(1), pages 182-205, February.
  14. Sargent, Thomas J & Wallace, Neil, 1982. "The Real-Bills Doctrine versus the Quantity Theory: A Reconsideration," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1212-36, December.
  15. Hartman, Richard, 1991. "Relative Price Variability and Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(2), pages 185-205, May.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:0512005. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.