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Money Demand

Money Demand

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Published by Venkatesh Swamy
KINGSTON UNIVERSITY, LONDON SCHOOL OF ECONOMICS

Money, Banking, and International Finance in Developing Countries (FE3178), 2009-2010

Money demand

Introduction

2

Money demand functions are fundamental in theoretical and empirical macro-monetary models.

In this regard, Goldfeld and Sichel (1990, page 300) state that “…the demand for money is a critical component in the formulation of monetary policy and a stable money demand function for money has long been perceived as a prerequisite
KINGSTON UNIVERSITY, LONDON SCHOOL OF ECONOMICS

Money, Banking, and International Finance in Developing Countries (FE3178), 2009-2010

Money demand

Introduction

2

Money demand functions are fundamental in theoretical and empirical macro-monetary models.

In this regard, Goldfeld and Sichel (1990, page 300) state that “…the demand for money is a critical component in the formulation of monetary policy and a stable money demand function for money has long been perceived as a prerequisite

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Published by: Venkatesh Swamy on Dec 22, 2009
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04/27/2012

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KINGSTON UNIVERSITY, LONDONSCHOOL OF ECONOMICSMoney, Banking, and International Financein Developing Countries (FE3178), 2009-2010
 Money demand 
Introduction
 
Money demand functions are fundamental in theoreticaland empirical macro-monetary models.In this regard,
Goldfeld and Sichel (1990, page 300)
state that the demand for money is a criticalcomponent in the formulation of monetary policy and astable money demand function for money has long been perceived as a prerequisite for the use of monetaryaggregates in the conduct of policy.”** Money demand’s role is particularly important indeveloping economies.That is the case because in those countries monetary policymaking generally rests on a monetary programmewithin which money demand plays a critical role.
2
 
That contrasts to what occurs in more advancedeconomies, like the United States and the UnitedKingdom, where the interest rate is the main policyinstrument (
e.g. Bernanke and Blinder, 1992
).This lecture introduces the theoretical and empiricalliteratures on money demand.
 
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