Analysis of the Determination of the Stock of Money

  • C. A. E. Goodhart


It is generally the case that macroeconomic models are constructed around a framework of accounting identities. For example, Keynesian models are based on the national income accounts. In monetary theory the identity MV=Py plays a central role. There is nothing reprehensible about constructing a model around a solid framework of identities. Indeed, the process of distinguishing key identities, whose existence or importance had not been previously recognised, has played a major role in the development of theory; for example, a relatively minor extension of the Keynesian identities led to the formulation of Kaldor’s theory of distribution[15].2


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© C. A. E. Goodhart 1984

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  • C. A. E. Goodhart

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