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The functions of money and the demand for liquidity

Listed author(s):
  • Claudio Sardoni

    ()

    (Dipartimento di Scienze Sociali ed Economiche, Sapienza University of Rome (Italy).)

Many Keynesian economists focus their attention on money as a store of value as a defence from uncertainty. Many others monetary economists, also quite close to the Keynesian approach in several respects, emphasise the importance of money as standard of value and means of payment. By drawing on Hicks's and Kaldor's contributions, this paper suggests an approach in which money is characterized by its two functions of standard of value and means of payment, which are inherently connected to one another. The role of store of value, in economies with well developed financial markets, can be normally played by other assets as liquid and risk-less as money. Therefore, the demand for liquidity as a defence against uncertainty should be kept distinct from the demand for money strictly defined.

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File URL: http://www.diss.uniroma1.it/sites/default/files/allegati/Sardoni_wpDISSE_3_15.pdf
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Paper provided by Sapienza University of Rome, DISS in its series Working Papers with number 3/15.

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Date of creation: Aug 2015
Handle: RePEc:saq:wpaper:03/15
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  1. Chang, Winston W & Hamberg, Daniel & Hirata, Junichi, 1983. "Liquidity Preference as Behavior toward Risk Is a Demand for Short-Term Securities-Not Money," American Economic Review, American Economic Association, vol. 73(3), pages 420-427, June.
  2. Holmström, Bengt, 2013. "Inside and Outside Liquidity," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262518536, July.
  3. J. M. Keynes, 1937. "The General Theory of Employment," The Quarterly Journal of Economics, Oxford University Press, vol. 51(2), pages 209-223.
  4. Benjamin M. Friedman, 2000. "Decoupling at the Margin: The Threat to Monetary Policy from the Electronic Revolution in Banking," NBER Working Papers 7955, National Bureau of Economic Research, Inc.
  5. J. Tobin, 1958. "Liquidity Preference as Behavior Towards Risk," Review of Economic Studies, Oxford University Press, vol. 25(2), pages 65-86.
  6. Hicks, John, 1989. "A Market Theory of Money," OUP Catalogue, Oxford University Press, number 9780198287247, April.
  7. Woodford, Michael, 2000. "Monetary Policy in a World without Money," International Finance, Wiley Blackwell, vol. 3(2), pages 229-260, July.
  8. McLeay, Michael & Radia, Amar & Thomas, Ryland, 2014. "Money creation in the modern economy," Bank of England Quarterly Bulletin, Bank of England, vol. 54(1), pages 14-27.
  9. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, July.
  10. Friedman, Benjamin M, 2000. "Decoupling at the Margin: The Threat to Monetary Policy from the Electronic Revolution in Banking," International Finance, Wiley Blackwell, vol. 3(2), pages 261-272, July.
  11. Benjamin M. Friedman, 1999. "The Future of Monetary Policy: The Central Bank as an Army With Only a Signal Corps," NBER Working Papers 7420, National Bureau of Economic Research, Inc.
  12. Friedman, Benjamin M, 1999. "The Future of Monetary Policy: The Central Bank as an Army with Only a Signal Corps?," International Finance, Wiley Blackwell, vol. 2(3), pages 321-338, November.
  13. Claudio Sardoni, 2008. "Some Notes on the Nature of Money and the Future of Monetary Policy," Review of Social Economy, Taylor & Francis Journals, vol. 66(4), pages 523-537.
  14. Charles Goodhart, 1989. "Money, Information and Uncertainty: 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262071223, July.
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