A dictum for monetary theory
A dictum for monetary theory; This essay argues that monetary theories should not contain an undefined object labeled money. Among existing theories that do not satisfy that dictum are models which assume that real balances are arguments of utility or production functions and models which assume cash-in-advance constraints. A main weakness of theories that do not satisfy the dictum is that they cannot address questions about which objects constitute money. Theories that do satisfy the dictum are those which specify assets by their physical properties and which permit the assets_ role in exchange to be endogenous. The essay briefly describes one such theory, a random matching model with assets that differ according to whether they throw off real dividends. This essay is reprinted, with permission, from the book Foundations of Research in Economics: How Do Economists Do Economics? (ed. Steven Medema and Warren Samuels), Cheltenham, U.K.: Edward Elgar Publishing, 1996.
Volume (Year): (1998)
Issue (Month): Win ()
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- Levine, David K., 1991.
"Asset trading mechanisms and expansionary policy,"
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- David K. Levine, 1991. "Asset Trading Mechanisms and Expansionary Policy," Levine's Working Paper Archive 43, David K. Levine.
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- Ostroy, Joseph M, 1973. "The Informational Efficiency of Monetary Exchange," American Economic Review, American Economic Association, vol. 63(4), pages 597-610, September.
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- Shi Shougong, 1995. "Money and Prices: A Model of Search and Bargaining," Journal of Economic Theory, Elsevier, vol. 67(2), pages 467-496, December.
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- Hellwig, Martin F., 1993. "The challenge of monetary theory," European Economic Review, Elsevier, vol. 37(2-3), pages 215-242, April.
- 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 1212-1236, December. Full references (including those not matched with items on IDEAS)
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