On Practical Validity of Quantity Theory of Money, or How Much the Dogmatism of Monetary Authorities Costs

2008 ◽  
pp. 31-45 ◽  
Author(s):  
S. Glazyev
Keyword(s):  
Monetary Policy ◽  
Economic Development ◽  
Money Supply ◽  
Market Equilibrium ◽  
Static State ◽  
Quantity Theory ◽  
Monetary Authorities ◽  
State Of The Economy ◽  
Market Organization

The article critically considers basic postulates of quantity theory of money. It shows that they reflect the static state of the economy in abstract models of market equilibrium but do not prove true in actual economic processes. In contrast to monetarists’ view, prices can rise as well as fall even if other variables of the monetarist equation are stable. Thus it cannot be used for grounding monetary policy. The author comes to the conclusion on the dogmatism of Russian monetary authorities that seriously hinders the country’s economic development. He proposes to switch to market organization of money supply basing on regulation of the refinancing rate.

scholarly journals Money Multiplier As a Determinant of Money Supply: The Case of Pakistan

1976 ◽  
Vol 15 (2) ◽  
pp. 211-217
Author(s):  
S.M. Mazahir Hasnain Hamdani
Keyword(s):  
Monetary Policy ◽  
Money Supply ◽  
Demand Function ◽  
Policy Makers ◽  
Money Multiplier ◽  
Monetary Authorities

Monetary policy is an important instrument for pursuing growth and stability in a less developed economy. However, it can yield desired results if and only if it is judiciously formulated and properly implemented. An appropriate formulation of monetary policy requires two basic relations to hold: (1) the demand function for money must be reasonably stable and empiri¬cally available to the monetary authorities and (2) the stock of money must be subject to control by the monetary authorities and the mechanism through which money supply is quantitatively determined in an economy should be clear to the policy-makers.

scholarly journals Income Velocity and per Capita Income in Pakistan: 1974-75 to 1991-92

1994 ◽  
Vol 33 (4II) ◽  
pp. 985-995
Author(s):  
Faiz Bilquees ◽  
Shahnaz Rauf
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Economic Development ◽  
Capita Income ◽  
Short Paper ◽  
Per Capita Income ◽  
Monetary Authorities ◽  
Per Capita ◽  
East And West

The purpose of this paper is to bring to light the effects of velocity on monetary policy during the process of development. The stated hypothesis is that if velocity declines as per-capita income increases, the monetary authorities can issue more money to finance economic growth with low rates of inflation. This short paper attempts to test the hypothesis in the post 1974 period for the present Pakistan over the period 1974-75 to 1991-92. This period corresponds to the official division of all the financial and other statistics between East and West Pakistan. The financial developments and the trends in overall economic development over the period is expected to yield results different from the studies done in the earlier period.

scholarly journals The impact of monetary policy on the economic growth of a small and open economy: The case of South Africa

2014 ◽  
Vol 8 (3) ◽  
pp. 348-362 ◽  
Author(s):  
V Khabo ◽  
C Harmse
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Monetary Policy ◽  
Money Supply ◽  
Open Economy ◽  
Opposite Effect ◽  
Test Statistic ◽  
Monetary Authorities ◽  
Repo Rate ◽  
The Impact

This study evaluates the impact of monetary policy on the economic growth of a small and open economy like that of South Africa. Structuralists contend that changes in money supply (M3) and inflation (CPI) are not significantly related to changes in economic growth (GDP), while orthodox economists argue that they are. Stucturalists also hold that monetary authorities cannot control M3, whereas orthodox economists believe they can. To structuralists, when monetary authorities pursue an expansionary policy, the opposite effect is achieved. Orthodox economists counter this argument. The ADT test statistic against the McKinnon critical values was used and it was found (i) that money supply changes and inflation are significantly related to changes in economic growth, and (ii) whereas monetary authorities can control M3 through the repo rate,  they cannot keep it within set targets.

scholarly journals Monetary Policy and Stock Price Dynamics in Nepal

2020 ◽  
Vol 3 (1-2) ◽  
pp. 18-38
Author(s):  
Mani Raj Shrestha
Keyword(s):  
Monetary Policy ◽  
Money Supply ◽  
Stock Prices ◽  
Financial Stability ◽  
Stock Price ◽  
Time Series Data ◽  
Series Data ◽  
Monetary Policies ◽  
Policy Goals ◽  
Monetary Authorities

Monetary authorities are attentive towards stock price movement because of its significance in financial stability. Though stock price is one of the major channels of monetary transmission, very little is known about it in Nepali context. This study analyzed monetary variables, stock prices, and monetary policy goals using time series data. Results from Koyck approach to distributed lags, vector autoregression and mediation analysis revealed mixed evidence of causality between monetary policy and stock prices. Though results were not consistent across different econometric analysis, inter-bank interest rate, narrow money supply, broad money supply, monetary policy announcement, and monetary policy stances were found to be significant in explaining stock prices. Furthermore, causality also existed from stock prices to monetary policy, suggesting that monetary authorities also consider development in stock prices while formulating monetary policies. However, stock prices had not been found to mediate the relationship between monetary policy variables and monetary policy goals, which questioned stock prices being a channel of monetary policy transmission in Nepal.

The Role of Different Channels in Transmitting Monetary Policy into Output and Price in Vietnam

2015 ◽  
pp. 20-40
Author(s):  
Vinh Nguyen Thi Thuy
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Money Supply ◽  
Monetary Transmission ◽  
Impulse Response Functions ◽  
Short Run ◽  
The Exchange Rate ◽  
The Interest Rate ◽  
Interest Rate Channel

The paper investigates the mechanism of monetary transmission in Vietnam through different channels - namely the interest rate channel, the exchange rate channel, the asset channel and the credit channel for the period January 1995 - October 2009. This study applies VAR analysis to evaluate the monetary transmission mechanisms to output and price level. To compare the relative importance of different channels for transmitting monetary policy, the paper estimates the impulse response functions and variance decompositions of variables. The empirical results show that the changes in money supply have a significant impact on output rather than price in the short run. The impacts of money supply on price and output are stronger through the exchange rate and credit channels, but however, are weaker through the interest rate channel. The impacts of monetary policy on output and inflation may be erroneous through the equity price channel because of the lack of an established and well-functioning stock market.

Endogeneity of Monetary Policy Reaction Fun~tion: An Experience from Pakistan's Economy

1991 ◽  
Vol 30 (4II) ◽  
pp. 931-941
Author(s):  
M. Aynul Hasan ◽  
Qazi Masood Ahmed
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Money Supply ◽  
Relative Effectiveness ◽  
Reaction Function ◽  
Standard Result ◽  
Policy Variable ◽  
Target Values ◽  
Monetary Policy Reaction Function ◽  
Policy Reaction Function

Monetary policy, in general, refers to those steps taken by the Central Bank to achieve such broader objectives of the economy as growth, employment, external balance and price stability through changes in the money supply, interest rates and credit policies. The money supply thus created by the Central Bank should be in response to the changes in key macroeconomic target variables such as GNP, balance of payments, inflation, internal debt and unemployment. Indeed, a properly estimated monetary policy reaction function can provide useful information regarding such matters as to whether the Central Bank, in fact, has been systematically accommodating to the changes in the target variables. The reaction function can also provide insight into the question as to what should be the relevant indicators of the monetary policy. In addition, as argued by Havrilesky (1967), it may also play a crucial role in the formulation of long-term monetary policy strategy. The other important consideration in the development of a monetary policy reaction function pertains to the endogeneity of the monetary policy. As pointed out by Goldfeld and Blinder (1972), if a policy variable responds to the lagged (or expected) target values, then considering such a policy variable as exogenous would not only introduce the problem of misspecification but will also produce serious biases in the parameters estimated from those models. In particular, if the monetary policy variable happens to be strongly influenced by target variables, then the standard result of the relative effectiveness of the monetary policy vis-a-vis fiscal policy can be questionable on the grounds of reverse causation problem.

scholarly journals Exiting from quantitative easing

2019 ◽  
Vol 10 (3) ◽  
pp. 1069-1107 ◽  
Author(s):  
Fumio Hayashi ◽  
Junko Koeda
Keyword(s):  
Monetary Policy ◽  
Regime Switching ◽  
Economic Conditions ◽  
Quantitative Easing ◽  
Structural Vector Autoregression ◽  
Policy Regime ◽  
State Of The Economy ◽  
Macroeconomic Effects ◽  
Structural Vector ◽  
Empirical Framework

We propose an empirical framework for analyzing the macroeconomic effects of quantitative easing (QE) and apply it to Japan. The framework is a regime‐switching structural vector autoregression in which the monetary policy regime, chosen by the central bank responding to economic conditions, is endogenous and observable. QE is modeled as one of the regimes. The model incorporates an exit condition for terminating QE. We find that higher reserves at the effective lower bound raise inflation and output, and that terminating QE may be contractionary or expansionary, depending on the state of the economy at the point of exit.

scholarly journals MONETARY POLICY AND TELECOMMUNICATION OUTPUT IN NIGERIA

2020 ◽  
Vol 3 (2) ◽  
pp. 62-73
Author(s):  
John Abiodun Akinde ◽  
Elijah Oludayo
Keyword(s):  
Monetary Policy ◽  
Money Supply ◽  
Negative Relationship ◽  
Negative Influence ◽  
Favourable Effect ◽  
Data Series ◽  
Long Run ◽  
Integration Test ◽  
Short Run ◽  
Positive Effect

Different policies impact on the growth of the telecommunication sector in Nigeria. One of these policies which influence the expansion or contraction of the telecommunication output is monetary policy. To this end, this research examined the effect of monetary policy on telecommunication output in Nigeria. For the purpose of analysis, time series secondary data were sourced from Central Bank of Nigeria (CBN) statistical bulletin covering the periods1986 to 2018. Autoregressive Distributed Lag (ARDL) technique was employed after examining the stationarity of the data series using Augmented Dickey-Fuller technique. The bound co-integration test revealed that there is long run equilibrium between the monetary policy variables employed and telecommunication output. The ARDL result revealed that money supply had significant and positive effect on telecommunication output in the short and long run; liquidity ratio produced an insignificant and negative relationship with telecommunication output in the short run and insignificant positive effect in the long run; exchange rate had insignificant negative effect in the short run and a significant positive effect on telecommunication output in the long run; consumer price index had significant negative influence on telecommunication outputboth in the short run and long run. The study concluded that monetary policy stimulates telecommunication output in Nigeria. Thus, it was recommended that the monetary authority should pursue an expansionary monetary policy to sustain the positive influence of money supply on telecommunication output in Nigeria while rolling out policy to reduce the liquidity ratio of banks in the short run but increase it in the long run so that the long term favourable effect of liquidity ratio can be felt on telecommunication output.  

scholarly journals Effect of Money Supply on the Stock Market

2017 ◽  
Vol 65 (2) ◽  
pp. 465-472 ◽  
Author(s):  
Vladimír Pícha
Keyword(s):  
Monetary Policy ◽  
Stock Market ◽  
Money Supply ◽  
Policy Framework ◽  
Vector Error Correction ◽  
Flow Of Funds ◽  
Portfolio Balance ◽  
Vector Error ◽  
Long Run ◽  
The Impact

This paper observes effect of money supply on the stock market through the portfolio balance channel as a transmission mechanism of monetary policy. National flow of funds accounts, specifically assets from US households’ portfolios, represent a key data source. Johansen’s cointegration methodology is employed in the empirical part of the paper to analyze both short term and long term relationships among researched variables. Estimates of vector error correction model help to reliably quantify intensity of the effect. Results show money supply excercises influence on valuation of S&P 500 index with 6 months lag. The impact is also distinguishable in the long run, whereas all observed asset classes can positively influence price of S&P 500. Findings are then contextualized in the concluding part of the paper using a monetary policy framework.

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