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Hume and Endogenous Money

  • Maria Pia Paganelli


    (Yeshiva University)

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    David Hume’s monetary theory has three standard yet inconsistent readings. As a forefather of the quantity theory of money, Hume sees money as neutral. As an inflationist, Hume sees an active positive role for monetary policy. As a monetarist, Hume sees an active positive role for monetary policy only in the short run. This paper reads Hume consistently instead by showing that for Hume money is endogenous and demand-driven. Hume would read the money equation in terms of reverse causation and the co-movement of inflation and output growth as driven by demand. The tenets of 18th century monetary theory corroborate this reading.

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    Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

    Volume (Year): 32 (2006)
    Issue (Month): 3 (Summer)
    Pages: 533-547

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    Handle: RePEc:eej:eeconj:v:32:y:2006:i:3:p:533-547
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    1. Berdell, J F, 1995. "The Present Relevance of Hume's Open-Economy Monetary Dynamics," Economic Journal, Royal Economic Society, vol. 105(432), pages 1205-17, September.
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