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The Excess Demand Theory of Money

Kehrwald, Bernie (2014): The Excess Demand Theory of Money.

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Abstract

This paper introduces a new monetary theory. A simple model is described in which a central bank sets the interest rate in a way that the excess demand for credits equals the preferred amount of money. It is compatible with the Keynesian liquidity preference theory and the neoclassical loanable funds theory and can be used to explain a series of phenomena. It is very suitable for introductory textbooks.

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