The Excess Demand Theory of Money

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

Abstract

This paper introduces a new monetary theory that is compatible with the Keynesian liquidity preference theory, the neoclassical loanable funds theory and the Post Keynesian endogenous money theory. It is very suitable for introductory textbooks since it gives a correct understanding of modern monetary systems. It can further be used to explain a series of phenomena.

• Item Type: MPRA Paper
• Language: English
• Keywords: money, interest rate, liquidity preference, loanable funds, endogenous money
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E40 - General; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E50 - General; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers

References

Ackley, G. (1957): Liquidity Preference and Loanable Funds Theories of Interest: Comment, American Economic Review, Vol. 47, No. 5, September, pp. 662–673.

Bank of England (2014): Money creation in the modern economy, Quarterly Bulletin Q1.

Bertocco, G. (2013): On Keynes’s Criticism of the Loanable Funds Theory, Review of Political Economy, Vol. 25, No. 2, April, pp. 309–326.

Bibow, J. (2000): The Loanable Funds Fallacy in Retrospect, History of Political Economy, Vol. 32, No. 4, Winter, pp. 789–831.

Bibow, J. (2001): The loanable funds fallacy: exercises in the analysis of disequilibrium, Cambridge Journal of Economics, Vol. 25, No. 5, pp. 591–616.

Blanchard, O., G. Illing (2009): Makroökonomie, Pearson Studium, 5th edition.

Fellner, W., H. M. Somers (1941): Alternative Monetary Approaches to Interest Theory, Review of Economics and Statistics, Vol. 23, No. 1, February, pp. 43–48.

Foley, D. K. (1975): On Two Specifications of Asset Equilibrium in Macroeconomic Models, Journal of Political Economy, Vol. 83, No. 2, April, pp. 303–324.

Gestrich, H. (1944): Kredit und Sparen, Walter Eucken.

Hansen, A. (1951): Classical, Loanable-Fund, and Keynesian Interest Theories, Quarterly Journal of Economics, Vol. 65, No. 3, August, pp. 429–432.

Hayes, M. G. (2010): The loanable funds fallacy: saving, finance and equilibrium, Cambridge Journal of Economics, Vol. 34, No. 4, pp. 807–820.

Hicks, J. R. (1937): Mr. Keynes and the “Classics”; A Suggested Interpretation, Econometrica, Vol. 5, No. 2, April, pp. 147–159.

Johnson, H. G. (1951): Some Cambridge Controversies in Monetary Theory, Review of Economic Studies, Vol. 19, No. 2, pp. 90–104.

Keynes, J. M. (1936): The General Theory of Employment, Interest and Money, St. Martin’s Press for the Royal Economic Society, 15th edition.

Keynes, J. M. (1937a): Alternative Theories of the Rate of Interest, Economic Journal, Vol. 47, No. 186, June, pp. 241–252.

Keynes, J. M. (1937b): The “Ex-Ante” Theory of the Rate of Interest, Economic Journal, Vol. 47, No. 188, December, pp. 663–669.

Lerner, A. P. (1938): Alternative Formulations of the Theory of Interest, Economic Journal, Vol. 48, No. 190, June, pp. 211–230.

Lindner, F. (2013): Does Saving Increase the Supply of Credit? A Critique of Loanable Funds Theory, Macroeconomic Policy Institute, IMK Working Paper No. 120–2013.

Moore, B. (1988): Horizontalists and Verticalists: The macroeconomics of credit money, Cambridge University Press.

Naples, M., N. Aslanbeigui (1996): What does determine the profit rate? The neoclassical theories presented in introductory textbooks, Cambridge Journal of Economics, Vol. 20, No. 1, pp. 53–71.

Ohlin, B. (1937a): Some Notes on the Stockholm Theory of Savings and Investment I, Economic Journal, Vol. 47, No. 185, March, pp. 53–69.

Ohlin, B. (1937b): – II, Economic Journal, Vol. 47, No. 186, June, pp. 221–240.

Ohlin, B. , D. H. Robertson, R. G. Hawtrey (1937): Alternative Theories of the Rate of Interest: Three Rejoinders, Economic Journal, Vol. 47, No. 187, September, pp. 423–443.

Patinkin, D. (1958): Liquidity Preference and Loanable Funds: Stock and Flow Analysis, Economica, New Series, Vol. 25, No. 100, November, pp. 300–318.

Robertson, D. H. (1938): Mr. Keynes and “Finance”, Economic Journal, Vol. 48, No. 190, June, pp. 314–318.

Snippe, J. (1985): Loanable funds theory versus liquidity preference theory, De Economist, Vol. 133, No. 2, pp. 129–150.

Stiglitz J. E., B. Greenwald (2003): Towards a New Paradigm in Monetary Economics, Raffaele Mattioli Lectures, Cambridge University Press.

Taylor, J. B. (1993): Discretion versus policy rules in practice, Carnegie-Rochester Conference Series on Public Policy, Vol. 39, December, pp. 195–214.

Tsiang, S. C. (1956): Liquidity Preference and Loanable Funds Theories, Multiplier and Velocity Analysis: A Synthesis, American Economic Review, Vol. 46, No. 4, September, pp. 539–564.

Tsiang, S. C. (1980): Keynes’s “Finance” Demand for Liquidity, Robertson’s Loanable Funds Theory, and Friedman’s Monetarism, Quarterly Journal of Economics, Vol. 94, No. 3, May, pp. 467–491.

Wicksell, K. (1907): The Influence of the Rate of Interest on Prices, Economic Journal, Vol. 17, No. 66, June, pp. 213–220.