The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Money Supply

  • Benjamin M. Friedman
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_875

Abstract

Governments supply money not only for use in everyday transactions but also, in the modern era, in order to influence their economies. In most advanced industrialized economies the demand for money is sufficiently unstable to make the quantity of money supplied, or its growth rate, an unreliable guide to how monetary policy influences either prices or real economic activity. Most central banks therefore set a designated interest rate, not the quantity or growth of money supplied. But because money supply and money demand help determine market interest rates, the money supply process remains essential to analysing how monetary policy operates.

Keywords

Aggregate demand Central bank independence Central bank reserves Central banking Central banks Friedman, M. Goodhart’s Law Hyperinflation Inflation Interest rates Monetary base Monetary policy Monetary policy rules Money Money demand Money multiplier Money supply Open market operations Optimal monetary policy Reserve-to-deposit ratio 

JEL Classifications

E5 
This is a preview of subscription content, log in to check access

Bibliography

  1. Cagan, P. 1956. The monetary dynamics of hyperinflation. In Studies in the quantity theory of money, ed. M. Friedman. Chicago: University of Chicago Press.Google Scholar
  2. Cagan, P. 1965. Determinants and effects of changes in the stock of money, 1875–1960. New York: NBER.Google Scholar
  3. Clarida, R., J. Gali, and M. Gertler. 1999. The science of monetary policy: A new Keynesian perspective. Journal of Economic Literature 37: 1661–1707.CrossRefGoogle Scholar
  4. Dewald, W.G. 1963. Free reserves, total reserves and monetary control. Journal of Political Economy 71: 141–153.CrossRefGoogle Scholar
  5. Friedman, M. 1953. The effects of a full-employment policy on economic stability: A formal analysis. In Essays in positive economics. Chicago: University of Chicago Press.Google Scholar
  6. Friedman, M. 1956. The quantity theory of money: A restatement. In Studies in the quantity theory of money. Chicago: University of Chicago Press.Google Scholar
  7. Friedman, M. 1969. The optimum quantity of money. In The optimum quantity of money and other essays. Chicago: Aldine.Google Scholar
  8. Friedman, B.M. 1990. Targets and instruments of monetary policy. In Handbook of monetary economics, ed. B.M. Friedman and F. Hahn, vol. 2. Amsterdam: North- Holland.Google Scholar
  9. Friedman, B.M. 1997. The rise and fall of money growth targets as guidelines for U.S. monetary policy. In Towards more effective monetary policy, ed. I. Kuroda. London: Macmillan.Google Scholar
  10. Friedman, M., and A.J. Schwartz. 1963. A monetary history of the United States, 1867–1960. Princeton: Princeton University Press.Google Scholar
  11. Goldfeld, S.M., and A.S. Blinder. 1972. Some implications of endogenous stabilization policy. Brookings Papers on Economic Activity 1972 (3): 585–644.CrossRefGoogle Scholar
  12. Goldfeld, S.M., and D.E. Sichel. 1990. The demand for money. In Handbook of monetary economics, ed. B.M. Friedman and F. Hahn, vol. 2. Amsterdam: North- Holland.Google Scholar
  13. Goodhart, C. 1984. Problems of monetary management: The U.K. experience. In Monetary theory and practice: The U.K. experience. London: Macmillan.Google Scholar
  14. Laidler, D.E. 1977. The demand for money: theories and evidence. 2nd ed. New York: Harper & Row.Google Scholar
  15. Lucas, R.E. Jr. 1976. Econometric policy evaluation: A critique. In The Phillips Curve and labor markets, ed. K. Brunner and A.H. Meltzer. Amsterdam: North- Holland.Google Scholar
  16. Modigliani, F., R. Rasche, and J.P. Cooper. 1970. Central bank policy, the money supply and the short-term rate of interest. Journal of Money, Credit and Banking 2: 166–218.CrossRefGoogle Scholar
  17. Poole, W. 1970. Optimal choice of monetary policy instruments in a simple stochastic macro model. Quarterly Journal of Economics 84: 197–216.CrossRefGoogle Scholar
  18. Romer, D. 2006. Advanced macroeconomics. 3rd ed. Boston: McGraw-Hill/Irwin.Google Scholar
  19. Teigen, R.L. 1964. Demand and supply functions for money in the Unites States: Some structural estimates. Econometrica 32: 467–509.CrossRefGoogle Scholar
  20. Tobin, J. 1970. Money and income: Post hoc ergo propter hoc? Quarterly Journal of Economics 84: 301–317.CrossRefGoogle Scholar
  21. Woodford, M. 2003. Interest and prices: Foundations of a theory of monetary policy. Princeton: Princeton University Press.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Benjamin M. Friedman
    • 1
  1. 1.