FriedmanMd 弗里德曼货币需求

The transmission mechanism
The issue is this: What is the precise nature of the causal chain linking Federal Reserve policy initiatives (such as open market operations) to the time path of real sector variables--i.e., GDP, and employment?
•The research program of the New Quantity theorists has accordingly been directed toward marshaling empirical (or econometric) evidence in support of the thesis that the demand for money is stable. • Having (ostensibly) “proved” the foregoing supposition, one can draw the conclusion that the income velocity of money (v) is also stable.
Formally, it is expressed by + - - - + Md = f(YP, , rb, re, p, p; U)
The signs of the partial derivatives are superimposed on the function. For example, tFra Baidu biblioteke “positive” sign above the YP means that: Md/YP>0. For the uninitiated, this can be read as follows: other things being equal, the demand for money is positively related to permanent income
Definitions
•Md is the demand for nominal money balances (M2 assets); •YP is permanent income; • is the ratio of nonhuman to human wealth; •rb is the rate of return on bonds; •re is the rate of return on equities;
1. 2. income and wealth; the opportunity cost of holding wealth in liquid form;
3. the purchasing power of money; 4. expected changes in the value of money arising from future price level movements; and 5. tastes & preferences.
1Milton
Friedman. “The Quantity Theory of Money: A Restatement,” in Studies in the Quantity Theory of Money. Chicago: University of Chicago Press, 1956
•p is the general price level;
•p is the expected change in the price level;and •U is tates and preferences of the wealth-holding agent
Basic points
Friedman argues that the demand for nominal liquid balances by economic agents depends on:
Friedman’s demand for money (Md) function1
Friedmans’ Md function is the single most important element of the new and improved version of the Quantity theory (also called “Monetarism,” and the “New Classcial economics, Part I).
Friedman’s Md as a methodological framework for empirical study
•Friedman claims the demand for nominal money balances is a “stable”function of the variables delineated above.
Liquidity Trap
rb
M
M’
As the money supply expands in this range, v falls
0
L or Md
If v fluctuates wildly, then there is no determinate relationship between money and nominal GDP—hence the importance or “proving” that there is no liquidity trap
Increase in the Money supply
Change in M causes divergence between “actual” and “desired” nominal balances
Agents draw down money balances to “desired” level by purchasing financial assets but also new goods and services—this is a “portfolio adjustment” process.
Increase in spending affects both prices and real ouput in the short run. In the long run, only prices are affected.