The Experts below are selected from a list of 303 Experts worldwide ranked by ideXlab platform
Robert W. Dimand - One of the best experts on this subject based on the ideXlab platform.
-
J. Laurence Laughlin versus Irving Fisher on the Quantity Theory of money, 1894 to 1913
Oxford Economic Papers, 2020Co-Authors: Robert W. DimandAbstract:Abstract In the controversy leading to the Federal Reserve Act of 1913, J. Laurence Laughlin of the University of Chicago and Irving Fisher of Yale were the leading opponent and proponent, respectively, of the Quantity Theory of money as the theoretical basis for reorganizing the US monetary system. Laughlin identified the Quantity Theory with bimetallist claims that monetizing silver would have lasting real benefits. Laughlin offered a cost of production Theory of the value of gold as an alternative to the Quantity Theory, while his students published empirical critiques of the Quantity Theory. Fisher upheld the Quantity Theory as explaining price movements while distancing the Theory from assertions of long-run non-neutrality of money. Laughlin and Fisher vigorously debated monetary Theory and monetary reform, notably at American Economic Association meetings. Their confrontations illuminate the monetary controversies preceding the Federal Reserve Act, which reflected the views of Laughlin and Willis (adviser to Congressman Carter Glass) while rejecting the mandate to stabilize the price level proposed by Senator Owen and his adviser Fisher.
-
Revitalizing the Quantity Theory of Money: From the Fisher Relation to the Fisher Equation
Irving Fisher, 2019Co-Authors: Robert W. DimandAbstract:Revitalizing the Quantity Theory of Money: From the Fisher Relation to the Fisher Equation traces Fisher’s revitalization of the Quantity Theory of money from Appreciation and Interest (1896) to The Purchasing Power of Money (1911a, with Harry G. Brown), as Fisher upheld the Quantity Theory (with money neutral in the long run but not the short run) against populist bimetallists (who saw long-run real benefits from increasing the Quantity of money, e.g. William Jennings Bryan) and their hard-money opponents (who denied that the price level was determined by the amount of money, e.g. J. L. Laughlin of the University of Chicago): the 1896 “Fisher relation” between interest rates in any two standards (real and nominal interest, uncovered interest arbitrage parity between two currencies, the expectations Theory of the term structure of interest rates) and the 1911 equation of exchange or “Fisher equation” (MV + M′M′ = PT, first presented by Fisher with different notation in the Economic Journal in 1897, but drawing on an earlier single-velocity equation of exchange by Simon Newcomb, to whose memory Fisher 1911 was dedicated).
-
david hume and irving fisher on the Quantity Theory of money in the long run and the short run
European Journal of The History of Economic Thought, 2013Co-Authors: Robert W. DimandAbstract:David Hume's classic statement of the Quantity Theory of money and the specie-flow mechanism of international adjustment in 1752 and Irving Fisher's authoritative restatement of the Quantity Theory in 1911 shared a concern with simultaneously upholding both the long-run neutrality and the short-run non-neutrality of money. This paper compares their approaches to attempting this reconciliation of the long run and short run, noting their shared emphasis on ‘illusion’ as the basis of short-run non-neutrality, and places their contributions in historical context. I argue that Hume and Fisher shared the same view of how automatic adjustment of the balance of payments worked under the gold standard, with Fisher's monetary reform proposals being an attempt to prevent the working of Hume's automatic adjustment mechanism.
-
irving fisher and the Quantity Theory of money the last phase
Journal of The History of Economic Thought, 2000Co-Authors: Robert W. DimandAbstract:Frank Steindl poses a surprising question in the title of his 1997 article, “Was Fisher a Practicing Quantity Theorist?†and reaches the conclusion that, “Clearly, with the decade of the Great Depression, Fisher was no longer a practicing Quantity theorist†(Steindl 1997, p. 259). Such a change in Fisher's monetary economics would sharply revise the view of Irving Fisher generally prevailing in the history of monetary economics, which is based primarily on The Purchasing Power of Money (Fisher with Brown 1911). Fisher's photograph (along with photographs of Marshall and Wicksell) appears on the cover of The Golden Age of the Quantity Theory (Laidler 1991). As Mark Blaug (1995, p. 3) put it, “isn't Irving Fisher the quintessential Quantity theorist if there ever was one [?]†Perhaps the most striking tribute to Fisher in the Quantity Theory tradition is from Milton Friedman, who, addressing the American Economic Association on the question “Have Monetary Policies Failed?†and having quoted from Fisher's 1910 exchange with J. L. Laughlin, remarked “And now I must cease quoting from Fisher, with whom I am in full agreement, and proceed instead to plagiarize him—albeit with modifications to bring him down to date†(Friedman 1972, p. 12).
Paolo Surico - One of the best experts on this subject based on the ideXlab platform.
-
two illustrations of the Quantity Theory of money breakdowns and revivals
The American Economic Review, 2011Co-Authors: Thomas J Sargent, Paolo SuricoAbstract:By extending his data, we document the instability of low-frequency regression coefficients that Lucas (1980) used to express the Quantity Theory of money. We impute the differences in these regression coefficients to differences in monetary policies across periods. A DSGE model estimated over a subsample like Lucas's implies values of the regression coefficients that confirm Lucas's results for his sample period. But perturbing monetary policy rule parameters away from the values estimated over Lucas's subsample alters the regression coefficients in ways that reproduce their instability over our longer sample. (JEL C51, E23, E31, E43, E51, E52)
-
monetary policies and low frequency manifestations of the Quantity Theory
2008Co-Authors: Thomas J Sargent, Paolo SuricoAbstract:To detect the Quantity Theory of money, we follow Lucas (1980) by looking at scatter plots of filtered time series of inflation and money growth rates and interest rates and money growth rates. Like Whiteman (1984), we relate those scatter plots to sums of two-sided distributed lag coefficients constructed from fixed-coefficient and time-varying VARs for US data from 1900-2005. We interpret outcomes in terms of population values of those sums of coefficients implied by two DSGE models. The DSGE models make the sums of coefficients depend on the monetary policy rule via cross-equation restrictions of a type that Lucas (1972) and Sargent (1971) emphasised in the context of testing the natural unemployment rate hypothesis. When the US data are extended beyond Lucas's 1955-75 period, the scatter plots mutate in ways that we attribute to prevailing monetary policy rules.
Ramzi Klabi - One of the best experts on this subject based on the ideXlab platform.
-
maurice allais on the Quantity Theory of money the ontological restatement
Journal of Economic Methodology, 2019Co-Authors: Ramzi KlabiAbstract:This paper is about a little known part of Allais’ oeuvre, namely his restatement of the Quantity Theory of money. It shows that this restatement contains an original refinement of the notion of stability of the relative demand for money. To explain this refinement, this essay investigates Allais’ concept of psychological time – a concept strongly emphasised but not duly examined by most of his commentators. It shows how Allais’ restatement of the Quantity Theory amounts – in the final analysis – to a Theory of time. It explores an analogy, Allais mentioned, between his Quantity Theory and the Theory of relativity in physics, revealing thereby the ontological nature of this restatement.
-
Maurice Allais on the Quantity Theory of money: the ontological restatement
Journal of Economic Methodology, 2018Co-Authors: Ramzi KlabiAbstract:ABSTRACTThis paper is about a little known part of Allais’ oeuvre, namely his restatement of the Quantity Theory of money. It shows that this restatement contains an original refinement of the noti...
Michael Graff - One of the best experts on this subject based on the ideXlab platform.
-
The Quantity Theory of money revisited
2020Co-Authors: Michael GraffAbstract:The paper reconstructs the origins of the Quantity Theory of money and its applications. Against the background of the history of money, it is shown that the Theory was flexible enough to adapt to institutional change and thus succeeded in maintaining its relevance. To this day, it is useful as an analytical framework. Although, due to Goodhart's Law, it now has only limited potential to guide monetary policy and was consequently abandoned by most central banks, an empirical analysis drawing on a panel data set covering more than hundred countries from 1991 to the present confirms that the Theory still holds: a positive correlation between the excess growth rate of the stock of money and the rate of inflation cannot be rejected. Yet, while the correlation holds for the whole sample, proportionality is driven by a small number of influential observations with very high inflation.
-
The Quantity Theory of money and quantitative easing
International Journal of Economic Policy in Emerging Economies, 2015Co-Authors: Michael GraffAbstract:The measures taken by central banks to mitigate the effects of the 'Great Recession' triggered by the 2007 subprime mortgage crises in the USA have led to a spectacular increase in the stock of money, but the following price inflation that is predicted by the Quantity Theory cannot be observed anywhere. Is inflation in the pipeline, inevitably to emerge soon or later, as the critics of 'monetary easing' keep claiming? Does the failure of inflation to materialise finally falsify the Quantity Theory? To answer this question, we first highlight the most important characteristics of the latest economic slump. Then, an empirical analysis drawing on data on 109 countries from 1991 to the present confirms that the Theory still has predictive power. While the classical proportionality theorem does not hold, excess money growth is a significant predictor of inflation. At the same time, the effect, although positive, is now so low that the fears regarding inflation as a consequence of the recent monetary easing do not appear warranted.
-
The Quantity Theory of Money in Year Six after the Subprime Mortgage Crisis
Financial Crises Sovereign Risk and the Role of Institutions, 2013Co-Authors: Michael GraffAbstract:This contribution traces the origins of the Quantity Theory of money and its applications. It is shown that the Theory was flexible enough to adapt to institutional change and thus succeeded in maintaining its relevance. To this day, it is useful as an analytical framework, although it now has only limited potential to guide monetary policy and has consequently been abandoned by most central banks. Yet, it is still passionately discussed by both followers and sceptics. Lately, the measures taken by central banks to mitigate the effects of the ‘Great Recession’ triggered by the 2007 subprime mortgage crises in the US have led to a spectacular increase in the stock of money, but the following price inflation that is predicted by the Quantity Theory cannot be observed anywhere. Is inflation in the pipeline, inevitably to emerge soon or later, as the critics of ‘monetary easing’ keep claiming? Does the failure of inflation to materialise finally falsify the Quantity Theory? To answer this question, we first highlight the most important characteristics of the latest economic slump. Then, an empirical analysis drawing on data on 109 countries from 1991 to the present confirms that the Theory still has predictive power. While the classical proportionality theorem does not hold, excess money growth is a significant predictor of inflation. At the same time, the effect, although positive, is now so low that the fears regarding inflation as a consequence of the recent monetary easing do not appear warranted.
-
the Quantity Theory of money in historical perspective
2008Co-Authors: Michael GraffAbstract:The paper reconstructs the origins of the Quantity Theory of money and its applications. Against the background of the history of money, it is shown that the Theory was flexible enough to adapt to institutional change and thus succeeded in maintaining its relevance. To this day, it is useful as an analytical framework. Although, due to Goodhart's Law, it now has only limited potential to guide monetary policy and was consequently abandoned by most central banks, an empirical analysis drawing on a panel data set covering more than hundred countries from 1991 to the present confirms that the Theory still holds: a positive correlation between the excess growth rate of the stock of money and the rate of inflation cannot be rejected. Yet, while the correlation holds for the whole sample, proportionality is driven by a small number of influential observations with very high inflation.
William R. Cline - One of the best experts on this subject based on the ideXlab platform.
-
Quantity Theory of Money Redux? Will Inflation Be the Legacy of Quantitative Easing?
Policy briefs, 2020Co-Authors: William R. ClineAbstract:Since the onset of the Federal Reserve's unconventional program of large scale asset purchases, known as quantitative easing (QE), some economists and financial practitioners have feared that the consequent buildup of the Fed's balance sheet could lead to a large expansion of the money supply, and that such an increase could cause a sharp rise in inflation. So far fears about induced inflation have not been validated. This Policy Brief examines the basis for the original concerns about inflation in terms of the classic Quantity Theory of money, which holds that inflation occurs when the money supply expands more rapidly than warranted by increases in real production. The Brief first reviews the US experience and shows that whereas rapid money growth might have been a plausible explanation of inflation in the 1960s through the early 1980s, subsequent data have not supported such an explanation. It then shows that the Quantity Theory of money has not really been put to the test after the Great Recession, because a sharp increase in banks' excess reserves and corresponding sharp decline in the “money multiplier” has meant that the rise in the Federal Reserve's balance sheet has not translated into increased money available to the public in the usual fashion. The most likely aftermath of quantitative easing remains one of benign price behavior. However, if nascent inflationary conditions materialize, the Federal Reserve will need to manage adroitly the large amounts of banks' excess reserves that have accumulated as a consequence of QE in order to limit inflationary pressures.
-
Quantity Theory of Money Redux? Will Inflation be the Legacy of Quantitative Easing?
National Institute Economic Review, 2015Co-Authors: William R. ClineAbstract:Since the onset of the Federal Reserve's unconventional programme of large-scale asset purchases, known as quantitative easing (QE), some economists and financial practitioners have feared that the consequent buildup of the Fed's balance sheet could lead to a large expansion of the money supply, and that such an increase could cause a sharp rise in inflation. So far fears about induced inflation have not been validated. This article examines the basis for the original concerns about inflation in terms of the classic Quantity Theory of money, which holds that inflation occurs when the money supply expands more rapidly than warranted by increases in real production. The article first reviews the US experience and shows that whereas rapid money growth might have been a plausible explanation of inflation in the 1960s through the early 1980s, subsequent data have not supported such an explanation. It then shows that the Quantity Theory of money has not really been put to the test after the Great Recession, because a sharp increase in banks’ excess reserves and corresponding sharp decline in the ‘money multiplier’ has meant that the rise in the Federal Reserve's balance sheet has not translated into increased money available to the public in the usual fashion. The most likely aftermath of quantitative easing remains one of benign price behaviour. However, if nascent inflationary conditions materialise, the Federal Reserve will need to manage adroitly the large amounts of banks’ excess reserves that have accumulated as a consequence of QE in order to limit inflationary pressures.
