IDEAS home Printed from https://ideas.repec.org/a/eej/eeconj/v18y1992i3p305-314.html
   My bibliography  Save this article

Understanding the Remarkable Survival of Multiplier Models of Money Stock Determination

Author

Listed:
  • Raymond E. Lombra

    (Penn State University)

Abstract

Ignoring various institutional and structural "details" has devastating implications for a large body of received theoretical and empirical work on the multiplier model, and the positive and normative economics which motivates and flows from it. The major elements of the critique include: the multiplier model is not structural, but rather is a reduced-form; reserves in practice have been endogenously determined; and the predictive accuracy of multiplier models is considerably overstated. So why does the model survive? Attractive pedagogical features, the poor performance of models with more structure, the tendency for recent expositors of the multiplier model to concede many of the points raised by the critique, and the difficulties associated with falsifying such models are emphasized.

Suggested Citation

  • Raymond E. Lombra, 1992. "Understanding the Remarkable Survival of Multiplier Models of Money Stock Determination," Eastern Economic Journal, Eastern Economic Association, vol. 18(3), pages 305-314, Summer.
    • Handle: RePEc:eej:eeconj:v:18:y:1992:i:3:p:305-314
    as

    Download full text from publisher

    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume18/V18N3P305_314.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. R. Alton Gilbert, 1985. "Operating procedures for conducting monetary policy," Review, Federal Reserve Bank of St. Louis, vol. 67(Feb).
    2. Samuel B. Chase & Lyle E. Gramley, 1965. "Time deposits in monetary analysis," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 1380-1406.
    3. Friedman, Benjamin M., 1977. "Empirical issues in monetary policy : A review of monetary aggregates and monetary policy," Journal of Monetary Economics, Elsevier, vol. 3(1), pages 87-101, January.
    4. McCloskey, Donald N, 1983. "The Rhetoric of Economics," Journal of Economic Literature, American Economic Association, vol. 21(2), pages 481-517, June.
    5. James Tobin, 1963. "Commercial Banks as Creators of 'Money'," Cowles Foundation Discussion Papers 159, Cowles Foundation for Research in Economics, Yale University.
    6. Lombra, Raymond & Struble, Frederick, 1979. "Monetary Aggregate Targets and the Volatility of Interest Rates: A Taxonomic Discussion," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 284-300, August.
    7. Marvin Goodfriend, 1982. "A model of money stock determination with loan demand and a banking system balance sheet constraint," Economic Review, Federal Reserve Bank of Richmond, vol. 68(Jan), pages 3-16.
    8. Richard G. Davis, 1982. "Monetary targeting in a zero balance world," Proceedings, Federal Reserve Bank of San Francisco, pages 20-51.
    9. Mascaro, Angelo & Meltzer, Allan H., 1983. "Long- and short-term interest rates in a risky world," Journal of Monetary Economics, Elsevier, vol. 12(4), pages 485-518, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Prakash Kumar Shrestha Ph.D., 2013. "An Empirical Analysis of Money Supply Process in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 25(2), pages 17-42, October.
    2. Zoltan Jakab & Michael Kumhof, 2015. "Banks are not intermediaries of loanable funds – and why this matters," Bank of England working papers 529, Bank of England.
    3. Prakash Kumar Shrestha, Ph.D., 2013. "An Empirical Analysis of Money Supply Process in Nepal," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 25(2), pages 17-42, October.
    4. Pavon-Prado, David, 2022. "The cost of excess reserves and inflation in the United States during the last century," MPRA Paper 112797, University Library of Munich, Germany.
    5. Clavero, Borja, 2017. "A contribution to the Quantity Theory of Disaggregated Credit," MPRA Paper 76657, University Library of Munich, Germany.
    6. Mr. Nils O Maehle, 2020. "Monetary Policy Implementation: Operational Issues for Countries with Evolving Monetary Policy Frameworks," IMF Working Papers 2020/026, International Monetary Fund.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Robert L. Hetzel, 1986. "A critique of theories of money stock determination," Working Paper 86-06, Federal Reserve Bank of Richmond.
    2. Goodhart, Charles, 1989. "The Conduct of Monetary Policy," Economic Journal, Royal Economic Society, vol. 99(396), pages 293-346, June.
    3. Wilfred Dolfsma, 2001. "Economists as subjects: Toward a psychology of economists," Forum for Social Economics, Springer;The Association for Social Economics, vol. 30(2), pages 77-88, March.
    4. J. Kornai., 2002. "The System Paradigm," Voprosy Ekonomiki, NP Voprosy Ekonomiki, vol. 4.
    5. Suzuki, Tomo, 2003. "The accounting figuration of business statistics as a foundation for the spread of economic ideas," Accounting, Organizations and Society, Elsevier, vol. 28(1), pages 65-95, January.
    6. Dimitrios Tsomocos, 2003. "Equilibrium analysis, banking, contagion and financial fragility," FMG Discussion Papers dp450, Financial Markets Group.
    7. Bansal, Ravi & Miller, Shane & Song, Dongho & Yaron, Amir, 2021. "The term structure of equity risk premia," Journal of Financial Economics, Elsevier, vol. 142(3), pages 1209-1228.
    8. Gordon, David B & Leeper, Eric M, 1994. "The Dynamic Impacts of Monetary Policy: An Exercise in Tentative Identification," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1228-1247, December.
    9. Brunnermeier, Markus K. & Niepelt, Dirk, 2019. "On the equivalence of private and public money," Journal of Monetary Economics, Elsevier, vol. 106(C), pages 27-41.
    10. Riccardo De Bonis & Matteo Piazza, 2021. "A silent revolution. How central bank statistics have changed in the last 25 years," PSL Quarterly Review, Economia civile, vol. 74(299), pages 347-371.
    11. Biagio Bossone, 2021. "Bank Seigniorage in a Monetary Production Economy," Working Papers PKWP2111, Post Keynesian Economics Society (PKES).
    12. Moss, Charles B. & Baker, Timothy G. & Brorsen, B. Wade, "undated". "Effects of Structural Changes in Macroeconomic Policy on Agricultural Prices," 1987 Annual Meeting, August 2-5, East Lansing, Michigan 269970, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    13. Hendrik P. van Dalen, 2003. "Pluralism in Economics: A Public Good or a Public Bad?," Tinbergen Institute Discussion Papers 03-034/1, Tinbergen Institute, revised 18 May 2004.
    14. Luzar, E. Jane, 1990. "Environmental Hazards Of Farming: Thinking About The Management Challenge: Discussion," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 22(01), pages 1-3, July.
    15. Dorotheea-Beatrice-Ruxandra Chiosea & Camelia-Daniela Hategan, 2024. "Research Trends in Going Concern Assessment and Financial Distress in Last Two Decades: A Bibliometric Analysis," Risks, MDPI, vol. 12(12), pages 1-23, November.
    16. Christine A. Parlour & Uday Rajan & Johan Walden, 2022. "Payment System Externalities," Journal of Finance, American Finance Association, vol. 77(2), pages 1019-1053, April.
    17. Ramis Khabibullin & Alexey Ponomarenko & Sergei Seleznev, 2018. "Forecasting the implications of foreign exchange reserve accumulation with an agent-based model," Bank of Russia Working Paper Series wps37, Bank of Russia.
    18. De Geest, Gerrit, 1996. "The debate on the scientific status of law & economics," European Economic Review, Elsevier, vol. 40(3-5), pages 999-1006, April.
    19. John H. Cochrane, 2017. "Macro-Finance," Review of Finance, European Finance Association, vol. 21(3), pages 945-985.
    20. Sujai Shivakumar, 2003. "The Place of Indigenous Institutions in Constitutional Order," Constitutional Political Economy, Springer, vol. 14(1), pages 3-21, March.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eej:eeconj:v:18:y:1992:i:3:p:305-314. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Victor Matheson, College of the Holy Cross (email available below). General contact details of provider: https://edirc.repec.org/data/eeaa1ea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.