IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

The monetary growth order

Listed author(s):
  • G\"unter von Kiedrowski
  • E\"ors Szathm\'ary
Registered author(s):

    Growth of monetary assets and debts is commonly described by the formula of compound interest which for the case of continuous compounding is the exponential growth law. Its differential form is dc/dt = i c where dc/dt describes the rate of monetary growth, i the compounded interest rate and c the actual principal. Exponential growth of this type is fixed to be neither resource-limited nor self-limiting which is in contrast to real economic growth (such as the GDP) which may have exponential, but also subexponential, linear, saturation, and even decline phases. As a result assets and debts commonly outgrow their economic fundament giving rise to the financial equivalent of Malthusian catastrophes after a certain interval of time. We here introduce an alternative for exponential compounding and propose to replace dc/dt = i c by dc/dt = i c^p where the exponent p (called reaction order in chemistry) is a quantity which will be termed monetary growth order. The monetary growth order p is seen as a tuning handle which enables to adjust gross monetary growth to real economic growth. It is suggested that the central banks take a serious look to this control instrument which allows tuning in crisis situations and immediate return to the exponential norm if needed.

    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:
    File Function: Latest version
    Download Restriction: no

    Paper provided by in its series Papers with number 1204.6590.

    in new window

    Date of creation: Apr 2012
    Handle: RePEc:arx:papers:1204.6590
    Contact details of provider: Web page:

    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.:

    in new window

    1. James Tobin, 1978. "A Proposal for International Monetary Reform," Eastern Economic Journal, Eastern Economic Association, vol. 4(3-4), pages 153-159, Jul/Oct.
    Full references (including those not matched with items on IDEAS)

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

    When requesting a correction, please mention this item's handle: RePEc:arx:papers:1204.6590. 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: (arXiv administrators)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.