At present, countries are concerned about inflation and the impact of inflation on each country’s economic growth. This inflation has been said by economists that…
At present, countries are concerned about inflation and the impact of inflation on each country’s economic growth. This inflation has been said by economists that inflation is a phenomenon of currency and currency, which has caused inflation in some countries by their monetary policy. According to the economic theory of Karl Marx, Irving Fisher, Friedman, inflation is caused by a continuous increase in the money supply.
The economic theories of Fisher, Friedman and an econometric model are applied to analyse the relationship between money supply and inflation. Besides, Vietnam’s and China’s research data are also collected in the period of 2012-2016.
It is found out that the continuous increase in the money supply causes inflation in the long-term, but the continuous increase in the money supply growth does not cause inflation in a short time, this was analyzed based on the theory of monetary quantity. Moreover, Chia’s and Vietnam’s correlations of the money supply growth and inflation are 99.1 per cent. These correlations are very close.
Research results show that money supply and inflation are closely related, and the money supply directly affects economic growth. Therefore, the government should have the relevant monetary policy to grow the economy and proposals to make monetary policy, control inflation levels and stimulate economic growth.
The role of money and monetary policy of the central bank in pursuing macroeconomic stability has significantly changed over the period since the end of World War II. Globalization, liberalization, integration, and transition processes generally shaped the crucial milestones of the macroeconomic development and substantial features of economic policy and its framework in Europe. Policy-driven changes together with variety of exogenous shocks significantly affected the key features of macroeconomic environment on the European continent that fashioned the framework and design of monetary policies.
This chapter examines the key basis of the central bank’s monetary policy on its way to pursue and preserve the internal and external stability of the purchasing power of money. Substantial elements of the monetary policy like objectives and strategies are not only generally introduced but also critically discussed according to their accuracy, suitability, and reliability in the changing macroeconomic conditions. Brief overview of the Eurozone common monetary policy milestones and the past Eastern bloc countries’ experience with a variety of exchange rate regimes provides interesting empirical evidence on origins and implications of vital changes in the monetary policy conduction in Europe and the Eurozone.
The equation of unified knowledge says that S = f (A,P) which means that the practical solution to a given problem is a function of the existing, empirical, actual…
The equation of unified knowledge says that S = f (A,P) which means that the practical solution to a given problem is a function of the existing, empirical, actual realities and the future, potential, best possible conditions of general stable equilibrium which both pure and practical reason, exhaustive in the Kantian sense, show as being within the realm of potential realities beyond any doubt. The first classical revolution in economic thinking, included in factor “P” of the equation, conceived the economic and financial problems in terms of a model of ideal conditions of stable equilibrium but neglected the full consideration of the existing, actual conditions. That is the main reason why, in the end, it failed. The second modern revolution, included in factor “A” of the equation, conceived the economic and financial problems in terms of the existing, actual conditions, usually in disequilibrium or unstable equilibrium (in case of stagnation) and neglected the sense of right direction expressed in factor “P” or the realization of general, stable equilibrium. That is the main reason why the modern revolution failed in the past and is failing in front of our eyes in the present. The equation of unified knowledge, perceived as a sui generis synthesis between classical and modern thinking has been applied rigorously and systematically in writing the enclosed American‐British economic, monetary, financial and social stabilization plans. In the final analysis, a new economic philosophy, based on a synthesis between classical and modern thinking, called here the new economics of unified knowledge, is applied to solve the malaise of the twentieth century which resulted from a confusion between thinking in terms of stable equilibrium on the one hand and disequilibrium or unstable equilibrium on the other.
The purpose of this paper is to provide logical and empirical explanations as to why monetary policy is ineffective with respect to affecting mortgage rates, and thus investment and aggregate demand.
Logical and empirical evidence is provided in support of the hypothesis that changes in the money supply have no significant impact on interest rates in general, and particularly on mortgage rates. This empirical analysis is based on a simple regression of changes in mortgage rates on changes in the money supply, and covers the 1990‐2004 period.
Support was found for our hypothesis that changes in money supply have no significant impact on interest rates.
The conclusion of this paper should be incorporated in all macroeconomics textbooks. Lack of such analyses may leave a confusing or misleading impression about economic theories in the mind of economics students.
One should not rely on monetary policy as an effective tool of stabilization policy.
The message of this paper is to readers of macroeconomics textbooks. This paper has an original value in that it communicates to readers that most macroeconomic textbooks fail to provide detailed and clear explanations as to why very frequently monetary policy does not achieve its objective of stabilizing the economy.
The assignment of targets to instruments in developing countries cannot satisfactorily follow any simple universal rule. Which approach is appropriate is influenced by…
The assignment of targets to instruments in developing countries cannot satisfactorily follow any simple universal rule. Which approach is appropriate is influenced by whether the economy is dominated by primary exports, by the importance of the domestic bond market and bank credit, by the extent of existing restriction in foreign exchange and financial markets, by the presence or absence of persistent high inflation, and by the existence or non‐existence of an active international market in the country's currency. Eighteen observations and maxims on stabilisation policy are tentatively drawn (pp. 64–8) from the material reviewed, and the maxims are partly summarised (pp. 69–71) in a schematic assignment, with variations, of targets to instruments.
This article investigates empirically the determinants of inflation in Saudi Arabia using the quarterly time‐series data over the period 1962:1 to 1981:IV. The basis of…
This article investigates empirically the determinants of inflation in Saudi Arabia using the quarterly time‐series data over the period 1962:1 to 1981:IV. The basis of this investigation is the monetary approach whereby the roles of both the money‐supply growth and the money‐demand growth are taken into account. Moreover, the potential effect of external monetary factors on the Saudi inflation is genuinely incorporated through the underlying money‐demand function. The proposed monetary model provides an adequate explanation of the Saudi inflationary process. Furthermore, the empirical results exhibit structural stability over time and do not suffer from simultaneous‐equation bias. The empirical results show that external monetary factors (particularly foreign interest rates) and inflationary expectations exert significant positive effects on inflation in Saudi Arabia. Importantly, the results also indicate that money‐supply growth has a quick and powerful positive impact upon the Saudi inflation with a unitary elasticity. Therefore, control over money‐supply growth appears an essential ingredient in any anti‐inflation policy in Saudi Arabia. Such monetary control can only be achieved in Saudi Arabia (and other oil‐exporting countries) through control over domestic government expenditures that have escalated particularly during the past decade.
One of the several claims that Seligman makes for Rooke is that he should be accorded priority in the discovery of the correct, that is Ricardian, doctrine of rent:there…
One of the several claims that Seligman makes for Rooke is that he should be accorded priority in the discovery of the correct, that is Ricardian, doctrine of rent:there seems little doubt that the doctrine of rent was developed practically simultaneously by Malthus, West, Torrens and Rooke in 1814, but so far as the priority of actual publication is concerned, the above list should be reversed. And in the interests of historical accuracy, Rooke and Torrens must hereafter be accorded the position which they deserve. (Seligman, 1903, p. 512)1