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The functions of money and the demand for liquidity

Author

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  • Claudio Sardoni

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

Abstract

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.

Suggested Citation

  • Claudio Sardoni, 2015. "The functions of money and the demand for liquidity," Working Papers 3/15, Sapienza University of Rome, DISS.
  • Handle: RePEc:saq:wpaper:03/15
    as

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    File URL: http://www.diss.uniroma1.it/sites/default/files/allegati/Sardoni_wpDISSE_3_15.pdf
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    References listed on IDEAS

    as
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    6. Parguez, A. & Seccareccia, M., 1999. "A Credit Theory of Money: The Monetary Circuit Approach," Working Papers 9902e, University of Ottawa, Department of Economics.
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    8. Woodford, Michael, 2000. "Monetary Policy in a World without Money," International Finance, Wiley Blackwell, vol. 3(2), pages 229-260, July.
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    14. 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.
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    More about this item

    Keywords

    Money; Liquidity; Uncertainty; Financial Markets.;

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G1 - Financial Economics - - General Financial Markets

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