Money and Value: A Reconsideration of Classical and Neoclassical Monetary Economics

211 Pages·1985·9.908 MB·English

by  Jean-Michel Grandmont

Econometric Society Monographs in Pure Theory
Money and value
Econometric Society Publication No. 5
Books in both the Econometric Society Monographs in Pure
Theory and the Econometric Society Monographs in Quanti-
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Money and value
A reconsideration of
classical and neoclassical monetary theories
JEAN-MICHEL GRANDMONT
Centre d'Etudes Prospectives d' Economie Mathematique
Appliquees a la Planification
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EDITIONS DE LA MAISON DES SCIENCES
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© Maison des Sciences de l'Homme and Cambridge University Press 1983
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First published 1983
First paperback edition 1985
Reprinted 1986, 1988, 1991, 1999
A catalogue record for this publication is available from the British Library
Library of Congress Cataloguing in Publication data
Grandmont, Jean-Michel.
Money and value.
(Econometric Society monographs in pure theory;
no. 5)
Bibliography: p.
Includes index.
1. Money I. Title II. Series.
HG221.G735 1983 332.4 82-14763
ISBN-10 0-521-25141-9 hardback
ISBN-10 0-521-31364-3 paperback
Transferred to digital printing 2005
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To Paulette and Jean
To Celine and Juliette
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Contents
Preface page xi
Introduction 1
1 Expectations and the real balance effect 8
1.1 Classical and neoclassical views on money 10
1.2 Structure of the model 14
1.3 Short-run demand functions 16
1.4 The existence of a short-run Walrasian
monetary equilibrium 21
1.5 The expected utility of money 27
1.6 Stationary states 32
1.7 The neutrality of money 38
Notes on the literature 45
Suggested reading 46
2 Money and credit in the short run 48
2.1 Structure of the model 51
2.2 Neoclassical views on inside and outside money 53
2.3 Short-run demand and supply functions 62
2.4 Pegging the interest rate 70
2.5 Controlling the money supply 79
2.6 The neutrality of money 91
Notes on the literature 95
Suggested reading 95
Vll
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viii Contents
3 Classical stationary states with money and credit 96
3.1 Consumers' characteristics 98
3.2 Long-run demands and supplies 99
3.3 The equations of steady states 103
3.4 Golden Rule steady states 109
3.5 Balanced steady states 113
3.6 Remarks on dynamics 117
Notes on the literature 121
Suggested reading 121
4 Open-market policies and liquidity 122
4.1 Neoclassical theory revisited 124
4.2 Consumers' characteristics 131
4.3 Short-run demands 132
4.4 Pegging the interest rate 135
4.5 Controlling the money supply 140
4.6 The liquidity trap 144
4.7 The neutrality of money 147
Notes on the literature 149
Suggested reading 149
Conclusion 150
APPENDIXES 153
A Preliminaries 155
A.I Basic notions 155
A.2 Functions and correspondences 157
A.3 Competitive equilibrium 159
A.4 Demand correspondences 160
B Expectations and the real balance effect 164
B.I Demand functions 164
B.2 Short-run Walrasian equilibrium 166
B.3 Stationary states 167
C Money and credit in the short run 170
C.I Demands and supplies 170
C.2 Pegging the interest rate 174
C.3 Controlling the money supply 175
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Contents ix
D Classical stationary states with money and credit 179
D.I Long-run demands and supplies 179
D.2 Golden Rule steady states 181
D.3 Balanced steady states 185
E Open-market policies and liquidity 186
E.I Short-run demand correspondences 186
E.2 Pegging the interest rate 188
E.3 Controlling the money supply 190
E.4 The liquidity trap 191
References 193
Index 197
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