Search results for "Quantity theory"
showing 3 items of 3 documents
The P* model and its performance for the Spanish economy
2000
The performance of the P∗ model is tested as an inflation forecaster for the Spanish economy. It is shown that log-run relationships work as expected according to the model and the Quantitative Theory of Money. The Error Correction Model constructed by using the gap between actual prices and the long-term equilibrium price level as an error correction term, offers a consistent explanation for the short-run dynamics in prices. On the other hand, the P∗ approach shows a forecasting ability similar to that presented for other countries in several studies, although the degree of accuracy in the prediction is not specially satisfactory, mainly for the period 1989:3- 1992:3, when the credibility …
Critical study of the quantity theory of money in the history of prices crisis
2014
The Quantity Theory of money which always links the increase in the high-Powered money supply and the general rise in prices is one of the oldest concepts in economics. After to have been the subject of many controversies at different times, it seems nowadays to hold less attention from the economists because the dispute is dissipated in a kind of religious choice to believe or not to believe to quantity theory. This theory officially influences the monetary policy of most of central banks in the world that bind conventional measures to control the money supply to curb inflation process. In many orthodox economics’ textbooks, the quantity theory is still deployed in perpetuum to explain the…
Rethinking Monetary Policy with Reference to Monetary Circuit Theory
2011
Standard monetary policy is grounded in the quantity theory of money, which links changes in the general price level to excess money that would induce excess demand on the goods market. This article shows that this theoretical foundation is misleading and harmful to growth. This is so because price determination is multifaceted. Central banks, especially the European Central Bank, currently tighten credit conditions whereas money is not an issue. In this way, they act not only on demand but also on the supply of goods. The additional reference made to rational expectations is an aggravating factor. Is there another way to conduct monetary policy? In this article it is argued that circuit th…