Abstract
In Taking Money Seriously and Other Essays, Davis Laidler argues that Walrasian models and new-classical business cycle theories, where transactions occur at equilibrium prices, cannot describe real world economies, where uncertain traders hold "buffer-stocks" of precautionary money balances. Imperfect information leads traders to set prices endogenously and to acquire market information from inflows and outflows of money. Traders adjust prices when cash balances persistently differ from targeted precautionary balances. Unlike standard monetarist and Keynesian models, the buffer-stock theory implies that in the short run actual money holdings frequently differ from desired holdings (unlike the contrary assumption of many money demand studies), that, even when money is endogenous, real balance effects occur, and that the loanable funds theory is the best explanation of interest rates.
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Siegel, B.N. Taking money seriously David Laidler Cambridge: The MIT press, 1990, xiv, 226 pp.. Atlantic Economic Journal 21, 60–71 (1993). https://doi.org/10.1007/BF02302244
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DOI: https://doi.org/10.1007/BF02302244