The Demand for Money by Households, Money Substitutes, and Monetary Policy

Many macroeconomists acknowledge the importance of behavior in a money demand relationship when formulating an efficient monetary policy. Many efforts have been made to estimate the money demand in function using many different specifications. This paper discusses South African empirical literature review of money demand. It revealed that different methods have been used to analyze the demand for money in South Africa, such as the linear function approach, the partial stock adjustment model, and the buffer stock disequilibrium money model. This study also discovered that few studies are done using co-integration and error correction methods and not all of these studies show that the money demand function in South Africa is stable. Implication for theory and practice, as well as area of future research, are also discussed in the study.

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Importance Of Money And Credit

International Business & Economics Research Journal (IBER) ◽

10.19030/iber.v8i1.3091 ◽

2011 ◽

Vol 8 (1) ◽

Author(s):

Michael Cosgrove ◽

Daniel Marsh

Keyword(s):

Monetary Policy ◽

Interest Rates ◽

Federal Reserve ◽

Rapid Growth ◽

Credit Crisis ◽

Short Term ◽

Demand For Money ◽

The Stability

The thesis of this paper is that the Federal Reserve could better achieve their goals if they paid more attention to quantity targets of both money and credit. The rapid growth in credit that ended in the credit crisis of 2007 and 2008 might have been avoided had the Federal Reserve attempted to incorporate quantitative credit measures in assessing policy. But their focus on short-term interest rates in conducting monetary policy to the exclusion of credit measures led to inaction on their part. The stability of the demand for money and credit determined by this analysis suggests the Federal Reserve could have taken policy steps early in this cycle jawboning, quantitative and regulatory to temper the credit bubble and potentially avoid the credit crisis.

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Role & Impact of Interest Rate in Jordan’ Economy from Points of View of Banking Managers

International Journal of Business and Social Research ◽

10.18533/ijbsr.v7i4.1039 ◽

2017 ◽

Vol 7 (4) ◽

pp. 15

Author(s):

REEM SAHER Alaraj

Keyword(s):

Monetary Policy ◽

Interest Rate ◽

Lower Cost ◽

Banking System ◽

Islamic Banks ◽

Demand For Money ◽

Two Factors ◽

Effective Role ◽

Points Of View

The research aimed at investigating the role, impact and determinants of interest rate in Jordanian economy from view points of banking managers in Jordan. The methodology is descriptive and analytical using mean, standard deviation, t-test and percentages as statistical tools. The study concluded that the role of interest rate in Jordanian monetary policy is restricted by two factors: pegging JD with US$ which limits the effective role of interest rate in Jordanian monetary policy and the dual banking system of traditional and Islamic banks where Islamic banks do not deal with Interest rate. Raising interest rate in Jordan caused higher cost of credit for companies, less competitiveness of exports, less liquidity in the economy, higher profit margin for banks, higher exchange rate of JD and higher inflation. Nevertheless, lowering interest rate in Jordan caused lower cost of borrowing, higher liquidity, better competitiveness of exports and more credit facilities by banks but inflation was much lower. Moreover, the study concluded the determinants of interest rate in Jordan are money supply, demand for money, inflation and economic conditions. In order to have an effective role for interest rate in monetary policy, the researcher recommends pegging JD to a basket of currencies.

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Demand For Money: Implications for The Conduct of Monetary Policy in Kenya

International Journal of Economics and Finance ◽

10.5539/ijef.v4n8p72 ◽

2012 ◽

Vol 4 (8) ◽

Cited By ~ 4

Author(s):

Moses M. Sichei ◽

Anne W. Kamau

Keyword(s):

Monetary Policy ◽

Demand For Money

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Money Supply as the Target of the Central Bank

Folia Oeconomica Stetinensia ◽

10.2478/foli-2014-0109 ◽

2014 ◽

Vol 14 (1) ◽

pp. 116-136

Author(s):

Andrzej Jędruchniewicz

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Money Supply ◽

Point Of View ◽

Main Trend ◽

Demand For Money ◽

Intermediate Target ◽

The Third ◽

Production And Consumption ◽

Shape Changes

Abstract The main purpose of the article is a critical analysis of the monetary policy strategy that is based on the adoption of money supply as an intermediate target. The analysis is conducted from the perspective of the theory of the Austrian school. The first part of the article presents an influence of the supply of money on changes of categories in economy according to mainstream theories of economics. The second part discusses the essence of the strategy of monetary policy using money supply as an intermediate target from the point of view of the main trend in economics. It is demonstrated that in order to use it, two elementary conditions must be met: the function of demand for money must be at least relatively stable and the central bank must practically shape changes in the money supply at the planned level. The third part is of key importance for the purpose of this article. It involves the criticism of Friedman’s principle, i.e. a constant increase in money supply as a monetary strategy. According to the Austrian theory, an increase in the quantity of money which is not financed by voluntary savings separates the time structure of production and consumption. Thus, after the period of prosperity there a collapse in production must take place. It is also pointed out that the crisis can be postponed only when the quantity of money increases at an ever faster rate.

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