Money, Banking, and the Economy

Money, Banking, and the Economy: A Monetarist View presents a systematic "monetarist" approach to money, banking, and the economy. The monetarist approach is a blend of the pre-Keynesian quantity theory, the tradition represented by D. H. Robertson, and the modern monetarist school, represented by Milton Friedman and his followers. A systematic development of a model of nominal income, based upon the Cambridge equation and the loanable funds theory of interest, is presented. This model is applied to the business cycle; inflation and stagflation; balance of payments and foreign exchange rates; and monetary and fiscal policy theories.

Comprised of 20 chapters, this book begins with an introduction to the concept of money and its functions and how it contributes to economic instability. The discussion then turns to the new and old definitions of the things that serve as money, the structure and institutions of financial markets and financial instruments; banks, banking markets, and banking regulations; and the money supply process. Subsequent chapters explore the structure and functions of the Federal Reserve System; the problem of implementing monetary policy; the Clower-Leijonhufvud idea of Say's Principle; the quantity theory of money as described by the equation of exchange or the Cambridge equation; and the connection between money and business cycles. The book concludes by describing a monetarist-public choice perspective on the efficacy of monetary and fiscal policies.

This monograph will be of value to undergraduate students and economists.

Inhalt

1 Problems of a Money Economy
1.1 The Functions of Money and Economic Efficiency
1.2 Money and Economic Instability
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
2 The United States Money Stock: Changing Definitions
2.1 The U.S. Money Stock-Old and New Definitions
2.2 Which Definition of Money Is Best?
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
3 Financial Markets and Financial Institutions
3.1 Types of Financial Markets
3.2 Some Detail on Financial Intermediaries
3.3 Federal and Federally Sponsored Credit Agencies
3.4 Financial Instruments
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
4 The Banking Business: Fundamentals
4.1 Commercial Banks as Firms
4.2 Time and Savings Deposits; Borrowing and Bank Capital
4.3 Bank Assets
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
5 Bank Operations, Regulation, and Structure
5.1 Running a Bank
5.2 Bank Regulation
5.3 The Structure of the U.S. Banking Industry
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
6 The Money Supply Process
6.1 An M-1 Money Supply Model
6.2 Shifts in the Money Multipliers
6.3 Analysis of Monetary Changes, 1960-1978
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
7 Organization and Control of the Federal Reserve System
7.1 Organization of the Federal Reserve System
7.2 Independence of the Federal Reserve System
7.3 The Fed's Dechning Membership
7.4 The Monetary Control Act of 1980
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
8 The Federal Reserve System as a Central Bank
8.1 The Fed's Balance Sheet
8.2 Member Bank Reserve Equation
8.3 The Monetary Base as a Policy Target
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
9 The Instruments of Monetary Policy
9.1 Open Market Operations
9.2 The Discount Mechanism
9.3 Reserve Requirements as a Policy Instrument
9.4 Selective Instruments of Monetary Policy
9.5 Moral Suasion
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
10 The Strategy of Monetary Policy
10.1 An Outhne of the Strategy Problem
10.2 Past Monetary Policy Strategies
10.3 Recent Strategies of Monetary Policy
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
11 Say's Principle and Monetary Equilibrium
11.1 Demand, Supply, and the Concept of Market Equilibrium: A Review
11.2 Say's Principle
11.3 Monetary Equilibrium and Disequilibrium
11.4 Income Equilibrium and Monetary Equilibrium
11.5 Equilibrium Income and Full Employment
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
12 Money and the Theory of Money Income
12.1 The Quantity Theory of Money
12.2 The Demand for Money
12.3 A Monetary Theory of Money Income
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
13 The Rate of Interest and the Theory of Income
13.1 Say's Principle and the Bond Market
13.2 The Theory of Interest
13.3 A Monetary Theory of Income
Summary
Appendix: The Term Structure of Interest Rates
Discussion Questions
Important Terms and Concepts
Additional Readings
14 The Federal Budget and the Economy
14.1 Methods of Financing Government Spending
14.2 Effects of a Pure Fiscal Policy on Money Income
14.3 Fiscal Policy Financed with Changes in the Money Supply
14.4 Empirical Evidence on Fiscal Policy
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
15 Transmission Mechanism of Monetary Influences on Income
15.1 How Monetary Shocks Affect Nominal Income
15.2 The Effects of Monetary Shocks on Output and Prices
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
16 Money and Business Cycles: The U.S. Experience
16.1 Monetary and Nonmonetary Theories of the Business Cycle
16.2 Behavior of Money Supply Over the Business Cycle
16.3 Cyclical Changes in the Cambridge k (or the Income Velocity of Money)
16.4 A "Neoclassical" Supply-Side Monetary Model
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
17 Inflation: Cause and Effects
17.1 The Problem and Its Causes
17.2 Some Myths of Inflation
17.3 Effects of Inflation on Households and Business
17.4 Inflationary Redistributions of Wealth and Income
17.5 Effects of Inflation on Resource Allocation
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
18 Inflation and Unemployment: The Stagflation Problem
18.1 The Natural Unemployment Rate Hypothesis
18.2 Expectations-Augmented Phillips Curves and the Accelerationist Hypothesis
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
19 Money, the Balance of Payments, and Exchange Rates
19.1 Money and the Balance of Payments Under Fixed Exchange Rates
19.2 Flexible Exchange Rates and the Purchasing Power Parity Theory
19.3 World Inflation
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
20 New Views on Stabilization Policies
20.1 Brief Review of Empirical Evidence on Policy Activism
20.2 The Credibility Effect, the German Hyperinflation, and the Fed
20.3 Incomes Policies
20.4 Can Democracy Tame Inflation?
Summary
Discussion Questions
Important Terms and Concepts
Additional Readings
Glossary
Index