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Real Money and Economic Growth

BLINOV, Sergey (2015): Real Money and Economic Growth.

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Abstract

People recognized the important role played by money in the economy a long time ago. However, it was only approximately 50 years ago that Milton Friedman convincingly proved that change in the quantity of money in the economy might have a very serious effect on the GDP. This paper reveals a most intimate non-linear linkage between growth of real GDP and growth of real money supply using the example of a number of countries and unions (Russia, Japan, Brazil and Eurozone). It is shown that exponential growth of real money supply corresponds to linear growth of real GDP. Hypotheses are advanced which explain such a nature of the inter-linkage. A number of practical recommendations are given which pertain, first of all, to monetary policy.

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