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Legal Restriction Theory and the Rate-of-Return Dominance of Money


  • Cesarano, Filippo


In this paper, recent contributions to the legal restrictions theory of money are critically examined from the perspective of received monetary economics. In particular, it is shown that, contrary to some interpretations, M. Friedman's work on the optimum quantity of money does not support the legal restrictions theory but follows a diametrically opposite approach. Furthermore, it is contended that there is a strict relationship between the theoretical foundations of money and interest rate dominance so that the latter is consistent with the essential properties of a monetary economy. Copyright 1994 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Cesarano, Filippo, 1994. "Legal Restriction Theory and the Rate-of-Return Dominance of Money," The Manchester School of Economic & Social Studies, University of Manchester, vol. 62(2), pages 199-208, June.
  • Handle: RePEc:bla:manch2:v:62:y:1994:i:2:p:199-208

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    References listed on IDEAS

    1. Mark Gertler, 1988. "Financial structure and aggregate economic activity: an overview," Proceedings, Federal Reserve Bank of Cleveland, pages 559-596.
    2. Gertler, M., 1988. "Financial Capacity, Reliquification, And Production In An Economy With Long-Tem Financial Arrangements," Working papers 8820, Wisconsin Madison - Social Systems.
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    6. N. Gregory Mankiw, 1986. "The Allocation of Credit and Financial Collapse," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 455-470.
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    8. Frederic S. Mishkin, 1992. "An Evaluation of the Treasury Plan for Banking Reform," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 133-153, Winter.
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    15. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-276, June.
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    Cited by:

    1. Chuang, Shi-Feng & Huo, Teh-Ming, 2004. "Legal restrictions and sunspots: A further inquiry on the real-bills doctrine versus the quantity theory debate," Journal of Macroeconomics, Elsevier, vol. 26(3), pages 431-442, September.

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