Abstract
The purpose of this paper is to try to weave the theoretical work of that emerging school of monetary economists who have espoused the ‘Legal Restrictions’ theory of the demand for money and monetary policy together with practical observations taken from the experience of the UK in recent years. Professor Neil Wallace, Professor of Economics at the University of Minnesota, coined this term, ‘The Legal Restrictions Theory of Money’, in a paper in the Federal Reserve Bank of Minneapolis Quarterly Review (Winter 1983), in his paper, ‘A Legal Restrictions Theory of the Demand for ‘Money’ and the Role of Monetary Policy’ (31). There had been forerunners of this approach in the literature much earlier, for example the article on ‘Problems of Efficiency in Monetary Management’ by Harry Johnson in 1968 (14), and in an extraordinarily prescient article by Fischer Black on ‘Banking and Interest Rates in a World Without Money’, in the Journal of Bank Research, (Autumn 1970) (2). More recently, this theoretical approach has been taken further by economists such as Fama (6), Robert Hall (12), Kareken (16), Sargent (24, 25), Wallace (16, 24, 25, 31), and other economists, with a centre in Minneapolis: the arguments and analysis of this developing school have been summarised and pooled together in a brilliant survey paper, ‘A Libertarian Approach to Monetary Theory and Policy’, by Professor Y.C. Jao of the Department of Economics, University of Hong Kong (13).
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Goodhart, C.A.E. (1986). The Implications of Shifting Frontiers in Financial Markets for Monetary Control. In: Fair, D.E. (eds) Shifting Frontiers in Financial Markets. Financial and Monetary Policy Studies, vol 12. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-5157-0_20
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DOI: https://doi.org/10.1007/978-94-009-5157-0_20
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