By Apostolos Serletis
This publication presents an account of the present literature at the call for for funds. It indicates how the cash call for functionality suits into static and dynamic macroeconomic analyses and discusses the matter of the definition (aggregation) of cash. Professor Serletis takes a microeconomic- and aggregation-theoretic method of the call for for funds, provides empirical proof utilizing fresh cutting-edge econometric technique, and acknowledges the lifestyles of unsolved difficulties and the necessity for additional developments.
New to this Edition
* elevated assurance of theoretical and empirical methods to the call for for funds, together with a brand new bankruptcy on cross-country evidence
* a brand new bankruptcy on cash call for concerns and estimation of the welfare expense of inflation utilizing instruments from public finance and utilized microeconomics
* a brand new bankruptcy on rational expectancies macroeconomics and matters equivalent to the Lucas critique, principles as opposed to discretion, and time inconsistency
* elevated insurance of the univariate and multivariate homes of the cash call for variables, nonlinear chaotic dynamics, and self-organized criticality
* revised insurance of financial asset call for platforms in accordance with in the neighborhood and globally versatile practical forms
* elevated insurance of the econometrics of call for structures highlighting the problem inherent with attaining either monetary and econometric regularity
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Extra info for The Demand for Money: Theoretical and Empirical Approaches (2nd Edition)
Example text
1 Steady State (ν = τ = 0) Under the assumption that the rate of population growth is zero (ν = 0), Lt+1 = Lt , and we have kt+1 = Kt+1 sYt + (1 − δ)Kt = , Lt+1 Lt 48 Chapter 4. Neoclassical Growth Theory which implies the following first-order difference equation kt+1 = sf (kt ) + (1 − δ)kt . 5) is the Solow model in discrete time. It says that the amount of capital per worker depends positively on the saving rate, s, and negatively on the depreciation rate, δ. 5), we can consider dynamic equilibria, in which every variable grows at some constant rate.
Such equilibria are known as steady states. Under our present assumptions (with no population growth and technical change), steady-state requires that capital per person is constant over time — that is, kt+1 = kt . 6) suggesting that δk∗ is the amount of saving (and therefore, investment) per capita, necessary to keep constant the level of capital per worker. We can also discuss what amount of capital accumulation is optimal. In order to do so, we assume a policymaker whose objective is the same as that of the representative economic agent, and in particular, to maximize steady-state per capita consumption.
4 The Lucas Critique Robert Lucas in his famous (1976) paper, “Econometric Policy Evaluation: A Critique,” presented an argument against the use of conventional econometric models as forecasting tools and for policy evaluation. The Lucas cririque is an important insight, and for it, Lucas was awarded the Nobel Prize in 1995. 16) and assume that ut is a serially correlated process, ut = ρut−1 + εt , with |ρ| < 1 and εt being white noise. Assume that in the past the money supply was fixed, say mt = 0 (or, equivalently, Mt = 1), and 34 Chapter 3.