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Monetary Theory and Practice pp 254–276Cite as

Disequilibrium Money — A Note

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Abstract

In recent years there has been a growing application of the concept of ‘disequilibrium’ between the demand for and supply of money, both as a means of elucidating certain monetary developments, i.e. to help explain movements in the observed monetary aggregates [5, 6, 11, 13, 31, 33, 34, 38],2 and, more comprehensively, to treat such disequilibria as one of the major forces driving economic developments in economic models of certain countries, e.g., UK, Australia, USA [15, 16, 20, 31, 32, 41]. However, the basic concept of ‘disequilibrium money’ is contentious (see in particular White [57]), the empirical basis for adopting the approach is debatable, and its application in economic analysis still in a fledgeling stage. It is the aim of this note to explore these issues. The next section discusses some general theoretical and/or partly semantic questions concerning the nature of this disequilibrium. The subsequent section describes evidence from the UK which appears consistent with the existence of disequilibrium money holdings, and difficult to explain in other ways. The final main section considers briefly how adoption of this approach may influence the modelling of the structural form of relationships between monetary developments and the economy more widely.

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  1. C. A. E. Goodhart
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© 1984 C. A. E. Goodhart

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Goodhart, C.A.E. (1984). Disequilibrium Money — A Note. In: Monetary Theory and Practice. Palgrave, London. https://doi.org/10.1007/978-1-349-17295-5_11

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