Money Function Research Articles

From Marketability to Flexibility: Pantaleoni's 'Impure' Theory of Money and Banking

This paper deals with Maffeo Pantaleoni's (1857-1924) analysis of money and banking and aims at demonstrating that the Italian economist developed one and the same theory for both institutions, whose central feature was the notion of flexibility and whose main claim was that the most important function of money and banks is the loosening of the real and temporal constraints caused to production and exchange activities by the complementarity relationships among production factors. It is claimed that this theory is crucial to understand how Pantaleoni passed from the pure equilibrium theory of the 1889 Principii to the impure theory of his later essays, where no general or partial equilibrium may arise. It is also showed that these later views foreran themes that were to be emphasized decades later by heterodox economists, particularly the Post Keynesian ones.

‘When They See Money, They Think it's Life’: Money, Modernity and Morality in Two Sites in Rural Malawi

In this article, I draw on archival documents and interviews with elderly Malawian men and women to elaborate a ‘philosophy of money’ very different from the mainstream classical view in social history. While social theorists in the classical Euro-American tradition have until now associated money with rationality, calculability and the draining of affect and emotion from daily life, Malawian elders looking back on the monetisation of their community see it as an agent of chaos, discord and irrational behaviour. This function of money is particularly pronounced in the realms of marriage and sexuality, as money is blamed for the perceived deterioration of relations between the genders. I argue that this view of money and economic change, while not empirically verifiable, provides a thought-provoking alternative to the tendency among Euro-American social theorists to associate money with rationalisation and the decline of emotion as a governing principle in social relations. Interviewer: Do you see that your grandchildren, or those of other people, will they have a good life like you had in the past? Esther Nambebwe: No, because the doing of today, they like wealth, this one is running after wealth, this one too, and when they are running for wealth, there they find death. (Interview with Esther Nambewe)

Theory and practice of monetary policy

Money is a store of value that serves as a unit of account and medium of exchange. Monetary policy is the conduct of themonetary authority in the issuance and supply ofmoney balances. The papers in this volume cosider the effects of monetary policy on the allocation of resources and the welfare of individuals at equilibrium. The functions of money and the modifications of the general equilibriummodel necessary to accommodate monetary economies point the way to alternative conduits from monetary policy to resource allocation and welfare.

Overcoming the zero bound on nominal interest rates: Gesell’s currency carry tax vs. Eisler’s parallel virtual currency

Despite the zero lower bound on the short nominal interest rate in Japan having become a binding constraint, conventional monetary policy in Japan, in the form of generalised open market purchases of government securities of all maturities, has never been pushed to the limit where all outstanding government debt and all current and anticipated future government deficits are (or are confidently expected to be) monetised. Open market purchases of private securities can create serious governance problems. Two ways of overcoming the zero lower bound constraint have been proposed. The first is Gesell’s carry tax on currency. The second is Eisler’s proposal for the unbundling of the medium of exchange/means of payment function and the numeraire function of money through the creation of a parallel virtual currency. This raises the fundamental issue of who chooses or what determines the numeraire used in private wage and price contracts—an issue that is either not addressed in the literature or addressed incorrectly. On balance, Gesell’s proposal appears to be the more robust of the two.

The Role of credit in a Keynesian monetary economy

This paper describes the features of a monetary economy on the basis of Keynes's distinction between a real exchange economy and a monetary economy. In The General Theory, Keynes identifies the reasons for the non-neutrality of money by highlighting the store of wealth function of money; this approach has been adopted by most Keynesian economists. The aim of this paper is to show that such an approach only partially explains the reasons for money non-neutrality and that important elements which demonstrate the relevance of monetary variables emerge when the means of payment function of money is considered. Investigating the role of this function requires that we deal explicitly with how spending decisions are financed. The paper argues that the market for credit must be considered separately from the market for money, and that a viable credit theory can be built from Keynes's post-General Theory writings.

Jenische, Sinti und Roma in der Schweiz by Helena Kanyar Becker (review)

MLR, 100.4, 2005 1159 Changing Notions of Money and Language in German Literature from i$og to igs6. By Regina Angela Wenzel. (Studies in German Language and Literature, 32; Bristol German Publications, 12) Lewiston, Queenston, and Lampeter: Mellen. 2003. x + 262pp. ?69.95. ISBN 0-7734-7058-1. The best aspect of Regina Wenzel's adapted doctoral thesis is, as appropriate to the genre, the close analysis of texts: chapters on the role of money and financial termi? nology in Fortunatus, Till Eulenspiegel, Nathan der Weise, Kabale und Liebe, Faust II, Der griine Heinrich, Von morgens bis mitternachts,and Der Besuch der alten Dame. These reflect and extend the state of scholarship in these areas and should be read carefully by anyone interested in these works. Beyond that, doubts set in. The theory of Chapter 1, that as money and language are both systems of negotiation whose usefulness depends on mutual trust (in the genuineness of the currency, the truth of the utterance), therefore there must be parallels in their literary treatment, is surely correct, and leads to useful insights about, for instance, the project of realist writ? ing (p. n)?though it would still have been useful, here, to go back to Christopher Prendergast's remarks in The Order of Mimesis (Cambridge: Cambridge University Press, 1986). But it does not follow that the same texts that exemplify changing no? tions of money are also good instances of changing awareness of language: those two developments have differentrhythms,however well Wenzel argues for their coming together, for instance, in Keller, or however sharply she observes Leibniz's analogy of the functions of money and of words (p. 97). In effect,therefore, Wenzel in her central chapters limits herself to half her sub? ject, money, with occasional forays into the other, language. Even this lacks a certain dimension, promised by Martin Swales in his preface: the systematic consideration of magic alongside money and language?few German writers to this day can conceive of prosperity except as the result of, if not actual magic, at least far-fetched coincidences, or else sharp practice. A reading of Simplicissimus could have added much to this theme and filled a chronological and thematic gap, with its transition from a superstitious world where treasures are guarded by uncanny spirits, via the easy-come-easy-go attitude of the soldier living on booty, to a world of commerce where judicious investment is the condition of profit. Die Insel Felsenburg would also suggest a shiftto Aufklarung values, and there is more to the (short) nineteenth cen? tury than can be dealt with by a chapter on Der griine Heinrich and short passages on Soll und Haben and Buddenbrooks. Though Wenzel ends on a note of Kulturpessimismus ?'The belief ofthe Enlightenment in at least some universal values seems to have collapsed irrevocably in our post-modern times' (p. 258)?she is only restating a timeless complaint which she has traced back to the late Middle Ages (p. 29). Some theorists of values, notably Pierre Bourdieu (not mentioned here) with his system of differentkinds of capital, would disagree. The volume is well presented as one expects of the publisher (Wenzel should prob? ably share this praise, forproviding perfect camera-ready copy). Notes at the ends of chapters?though surely an oddity now that footnotes magically arrange themselves without human intervention?help to overcome the disadvantage ofthe lack ofa bib? liography. Cardiff University Alfred D. White Jenische, Sinti und Roma in der Schweiz. Ed. by Helena Kanyar Becker. (Basler Beitrage zur Geschichtswissenschaft, 176) Basel: Schwabe. 2003. 185 pp. SwF 48; ?33.50. ISBN 3-7965-1973-3. Helena Kanyar Becker'sjenische, Sinti und Roma in der Schweiz represents an impor? tant contribution to German cultural studies, being the firstvolume to deal with the 1160 Reviews history and culture of Switzerland's 35,000 Yenish (or 'White Gypsies') and Sinti, 2,500 Travellers, and some 30,000 immigrant Romanies from south-eastern Eur? ope. Becker's aim is to highlight their history of abuse and persecution, and increase understanding of their culture and traditions. The authors are all active in the field of Yenish, Romany, and minority rights,and there is a...

Changing Notions of Money and Language in German Literature from 1509 to 1956 by Regina Angela Wenzel (review)

MLR, 100.4, 2005 1159 Changing Notions of Money and Language in German Literature from i$og to igs6. By Regina Angela Wenzel. (Studies in German Language and Literature, 32; Bristol German Publications, 12) Lewiston, Queenston, and Lampeter: Mellen. 2003. x + 262pp. ?69.95. ISBN 0-7734-7058-1. The best aspect of Regina Wenzel's adapted doctoral thesis is, as appropriate to the genre, the close analysis of texts: chapters on the role of money and financial termi? nology in Fortunatus, Till Eulenspiegel, Nathan der Weise, Kabale und Liebe, Faust II, Der griine Heinrich, Von morgens bis mitternachts,and Der Besuch der alten Dame. These reflect and extend the state of scholarship in these areas and should be read carefully by anyone interested in these works. Beyond that, doubts set in. The theory of Chapter 1, that as money and language are both systems of negotiation whose usefulness depends on mutual trust (in the genuineness of the currency, the truth of the utterance), therefore there must be parallels in their literary treatment, is surely correct, and leads to useful insights about, for instance, the project of realist writ? ing (p. n)?though it would still have been useful, here, to go back to Christopher Prendergast's remarks in The Order of Mimesis (Cambridge: Cambridge University Press, 1986). But it does not follow that the same texts that exemplify changing no? tions of money are also good instances of changing awareness of language: those two developments have differentrhythms,however well Wenzel argues for their coming together, for instance, in Keller, or however sharply she observes Leibniz's analogy of the functions of money and of words (p. 97). In effect,therefore, Wenzel in her central chapters limits herself to half her sub? ject, money, with occasional forays into the other, language. Even this lacks a certain dimension, promised by Martin Swales in his preface: the systematic consideration of magic alongside money and language?few German writers to this day can conceive of prosperity except as the result of, if not actual magic, at least far-fetched coincidences, or else sharp practice. A reading of Simplicissimus could have added much to this theme and filled a chronological and thematic gap, with its transition from a superstitious world where treasures are guarded by uncanny spirits, via the easy-come-easy-go attitude of the soldier living on booty, to a world of commerce where judicious investment is the condition of profit. Die Insel Felsenburg would also suggest a shiftto Aufklarung values, and there is more to the (short) nineteenth cen? tury than can be dealt with by a chapter on Der griine Heinrich and short passages on Soll und Haben and Buddenbrooks. Though Wenzel ends on a note of Kulturpessimismus ?'The belief ofthe Enlightenment in at least some universal values seems to have collapsed irrevocably in our post-modern times' (p. 258)?she is only restating a timeless complaint which she has traced back to the late Middle Ages (p. 29). Some theorists of values, notably Pierre Bourdieu (not mentioned here) with his system of differentkinds of capital, would disagree. The volume is well presented as one expects of the publisher (Wenzel should prob? ably share this praise, forproviding perfect camera-ready copy). Notes at the ends of chapters?though surely an oddity now that footnotes magically arrange themselves without human intervention?help to overcome the disadvantage ofthe lack ofa bib? liography. Cardiff University Alfred D. White Jenische, Sinti und Roma in der Schweiz. Ed. by Helena Kanyar Becker. (Basler Beitrage zur Geschichtswissenschaft, 176) Basel: Schwabe. 2003. 185 pp. SwF 48; ?33.50. ISBN 3-7965-1973-3. Helena Kanyar Becker'sjenische, Sinti und Roma in der Schweiz represents an impor? tant contribution to German cultural studies, being the firstvolume to deal with the ...

Futures and Money Demand: A Portfolio Allocation Model

The modern theory on money demand incorporates the evolution of financial markets behaviour, and then of households' allocation and preferences in different fashions; innovation in money demand can be considered as an increasing number of liquid assets between which to choose, considering money as a store of value and as a mean of payment; innovation modifies the utility of money holdings, through wealth and substitution effects. Liquidity has to be weighted with risk aversion and profitability to incorporate portfolio innovation properly. Aim of this paper is to look at the effects of futures' introduction into the demand for money function, expressed accepting the Keynesian-Tobin approach, where substitution effect is present. Then, a model of portfolio utility is going to be developed and discussed. The model is based on the Lancaster type utility function, and utility depends on profitability and liquidity, the first being related to risk too. Futures are (more) liquid assets and exhibit the same risk of the underlying, so that the efficient portfolio should include futures instead of the underlying; derivatives crowd out underlying assets and this effect influences money demand parameters. The interest rate elasticity (sign and magnitude) is analysed and discussed as the parameter incorporating the innovation. Some empirical verification confirms the model coherence and meanings for the US economy.

Locke's Anthropology: Travel, Innateness, and the Exercise of Reason

Previous accounts of Locke's ethnographic perspective on human custom have commonly focused on what might be called his political anthropology, above all in the Second Treatise and Locke's view of the state of nature. His discussion of the origins of government, the function of money in transforming political relations, and the role of property led him to comment suggestively on historical instances of Amerindian practice derived from his reading of travel literature.1 Interesting though they are, these examples represent only a part of Locke's engagement with questions of custom and belief around the world and his view of the primitive. In the first book of the Essay concerning Human Understanding (1690), Locke developed a case against innate ideas and principles with far reaching anthropological implications, causing alarm to his contemporaries in ways that his travel references in the Treatises, on the whole, did not. Rather than dwell on the controversy, I propose to investigate the anthropological dimension of Locke's critique in some detail, initially focusing on how he used his sources and represented what they had to say.The 'anthropological' side of Locke's strategy against innateness was to point out the existence of irreducible cultural diversity, which he refused to write off as degeneracy caused by education or the results of the Fall.2 In this context, we can trace Locke's engagement with the phenomenon of cultural diversity to two principal sources.3 In the first instance, his way of approaching human nature through a study of customs and manners was indebted to the methodology of natural history. This approach emphasised the accumulation of evidence on a probabilistic basis without assuming a knowledge of essences in advance. From the perspective of such a natural history, Locke refuted the claim of innate ideas or principles by treating their existence as an empirical question, a matter of fact subject to determination through historical research.The logic of Locke's position was based on the claim that attributions of innate principles, tendencies or ideas, required as a necessary condition the establishment of universal consent to an agreed set of moral tenets and beliefs (such as the idea of God). Accordingly, he made use of reports of cultural diversity to attack supposedly innate common notions or natural prolepses, drawing on a technique of argument well established in the sceptical tradition. Sceptics, both ancient and early modern, pointed to incommensurable customs and the existence of cultural difference in order to demonstrate the absence of universal consent and also to raise the criterion problem (i.e., the lack of a criterion for deciding differences of moral opinion). In so doing, Locke answered Stoic assumptions about a uniform human nature.4The two sources of Locke's encounter with diversity converged in his reading of travel literature. This material not only confirmed the absence of unanimous consent, as Locke referenced it, but it also constituted up-to-date information, supplying empirical testimony on human practice which could be cross-checked and confirmed. Strictly speaking, Locke's argument against innateness did not require the extended attention he gave to accounts of travel to distant parts of the world. Variation in opinion and belief of almost any kind (at home as much as abroad) would have been sufficient for his needs. But there is no doubt that he regarded himself as strengthening the case against unanimous consent or a consensus gentium by surveying the testimony of travellers so carefully. The fact that 'whole Nations' (I.iii.9) dissented from what allegedly unified mankind lent credence to the view that no internal rules or principles inhabited the soul. Those closest to nature - primitive peoples - evidently lacked the requisite knowledge or tendency to embrace appropriate moral practices and religious beliefs. Polite nations, whom we might have expected to benefit from learning and inquiry, observed the same lack of support for these basic notions. …

The effects of time and money prices on treatment attendance for methadone maintenance clients

Many methadone maintenance clients are required to visit a clinic daily, so treatment attendance is essential for clients' compliance and treatment effectiveness. Using data derived from a unique survey, this study provides evidence of economic barriers to regular treatment attendance. Hypotheses tested are (1) higher personal costs reduce treatment attendance, and (2) willingness to pay (WTP) provides better time price estimates than wage rates. The findings suggest that both time and money function as rationing devices for methadone maintenance clients. The study finds WTP preferable to wage rate in measuring time price as evaluated by the effects of time price on treatment attendance.

Money and prices: evidence from the G7 countries

This paper examines the exogeneity of money and prices within a money demand vector error-correction model. The exogeneity of the variables is central to several ‘buffer stock’ models. However, the paper makes two modifications to the traditional approach. The first is to explicitly acknowledge the importance of the supply of money function by including the function alongside its demand counterpart. The second is to estimate the behaviour of the nominal sector and real sector simultaneously. Overall, the results from the G7 countries suggest that the concerns raised by ‘buffer stock’ models are relevant.

Modelling the demand for money in New Zealand

The paper reports on the results of estimating both the long- and short-run demand for money function in New Zealand, 1990–2000 using quarterly data and cointegration- and error-correction-based models. It is found that price, real income and interest rate variables are integrated of order 1 or I(1). Using Phillips and Hansen [Rev. Econ. Stud. 57 (1990) 99] fully modified estimation methods, we establish the existence of a long-run cointegrating relationship among these three variables. Using the residuals from this model to represent the error-correction mechanism (ECM) term, we identify a short-run model utilising Hendry’s general-to-specific (GTS) approach. The model is shown to satisfy the typical diagnostic requirements of a multiple regression model. Three event dummies are used to capture key events of relevance to monetary policy in New Zealand.

Evidence on the Demand for Money Function in Uganda

The paper provides an empirical analysis of the demand for money function in Uganda. It argues that monetary policy: based on monetarist views of the dynamics of a less developed economy is, to say the least, ineffective in regulating the economy. An error correction model is used to examine the character of the demand for money - in particular if it is stable in order for traditional monetary policy to be effective. The evidence on Uganda suggests that the demand for money function is unstable and hence, monetary policy needs to be used in conjunction with other policies to achieve the goal of economic stabilisation and adjustment.

The Money Genogram

The issue of money is a common clinical problem that has received little attention in the literature. The development of a specific focused genogram concerning money will help the clinician assess the meaning and function of money and family-of-origin patterns dealing with money. The money genogram will facilitate discussion of this issue, as clinicians are often reluctant to ask probing questions in this area and couples are reluctant to raise the issue.

Dollarization in Canada: where does the buck stop?

The sharp depreciation of the Canadian dollar and the successful launch of the euro have spawned an animated debate in Canada about the potential benefits of formally adopting the US dollar as the national currency. Some observers have suggested that this debate is largely irrelevant, since the Canadian economy is already highly “dollarized.” Canadian businesses and households, they assert, often use the US dollar in preference to their own currency to perform standard money functions. Very little evidence has been advanced, however, to support these claims. This paper examines the available data in an effort to correct this informational deficiency and to draw some tentative conclusions about the extent to which Canada has already been informally dollarized. The evidence suggests that many of the concerns about the imminent dollarization of the Canadian economy are misplaced. The Canadian dollar continues to be used as the principal unit of account, medium of exchange, and store of value within Canada’s borders, and there is no indication that dollarization is likely to take hold in the foreseeable future.

Monetary dynamics: a market approach

The behaviour of the short-run responses implied by the identification of a long-run money demand relationship is examined. These responses have recently been interpreted as representing the policy stance of the monetary authority. However, as movements in the monetary aggregate reflect both demand and supply adjustments, estimating the short-run dynamics solely within the money demand relationship may produce biased results. In order to address this issue, the paper explicitly acknowledges the importance of the supply of money function by including the function alongside the demand for money function. While the interaction of the two equations continues to produce the long-run quantity theory result, the additional detail provides more accurate estimates of the individual short-run adjustments within the two equations.

An early evaluation of the introduction of euro banknotes and coins

The final stage of the changeover to the euro consisted of the introduction of euro coins and banknotes on 1 January, 2002. The national changeover plans, that provided the scenarios, were based on the exclusive transaction function of money. However, in most European countries high‐denomination banknotes were significantly hoarded and/or used in the underground economy. Since the holders of these banknotes could not convert them anonymously in the two months changeover period, some feared that many banknotes would invade the payment system, leading to a cash‐crash. Nevertheless the changeover process evolved smoothly. As for the future, chances are that some users in the regular sector have permanently changed their payment habits by shifting towards electronic means of payment. In the longer run we believe, however, that the tolerant attitude of the authorities with respect to currency use in the underground sector, will sustain the demand for currency.

Modelling the demand for M3 in the Euro area

Modelling monetary transmission is central to understanding the role of monetary policy in the Euro area, and money demand is commonly seen as a link in that transmission mechanism. Since the beginning of the 1990s, many studies have suggested that the demand for Euro area broad money is stable over the long run because the estimation of an area-wide demand for money function provides an appropriate solution to a number of potential causes of misspecification of the single-country relations (such as spillover effects and currency substitution), and enjoys the positive consequences of a statistical averaging effect. On the other side, it must be stressed that previous benefits can be achieved at the risk of introducing parameter heterogeneity into the area-wide relationship. In order to shed some light on the issue, this study is first devoted to an analysis of the main econometric features of the money M3 demand at Euro area and single country levels, then it compares the two sets of results in a common framework that, differently from all previous studies, explicitly takes account of the potential nonstationarity of the variables of interest in both estimation and testing phases. The comparison shows that the area-wide money demand is more smooth and less subject to shocks than the single-country ones. Finally, a number of poolability tests run over subgroups highlight that low precision associated with the estimates of the parameters of the national models makes it impossible to exclude that their long-run specifications do in fact coincide.

Stability of the money demand function: evidence from Ghana

This paper estimates the demand for money (M2) in Ghana for the period 1960 to 1996. The hypothesis is that the different macroeconomic adjustment policies (privatization, removal of foreign exchange controls etc.) which began in the mid 1980s would alter the demand for money function. The results of the study clearly show a structural break in the demand for money function in 1983.

The Concept of Money

AbstractThe authors of this article—a lawyer and economist—describe modern developments in the forms and functions of money and examine the question of whether the current legal regulation (in the Russian Federation) adequately reflects such developments. The authors suggest that the rule applicable to non-cash money be applied to cash money since the distinction in legal regulation is based more on traditions than it is on actual differences in substance.