Keynesian comparison
Publish: 2021-04-28 23:21:43
1. The concept of supply and demand is one of the basic laws of economics. In short, the rarer things are and the more they are needed, the higher the price is
the bitcoin protocol predetermines the number of currencies in circulation to be 21 million. There are less than 4 million bitcoins left to mine, and with the popularity of cryptocurrency, scarcity seems to have an impact on prices
of course, we also see the price drop e to the same mechanism. Once Nobuaki Kobayashi, the trustee of Mt. GOx, declared bankruptcy, a large number of bitcoins were sold, and the price began to fall as the market was expected to flood< Although bitcoin is the most famous cryptocurrency with the largest circulation at present, investors also have hundreds of other options for cryptocurrencies. Generally speaking, the existence of competitors can guarantee the investment value. Without strong alternatives, such as the euro, the Renminbi or the pound, the value of the dollar would be different. However, the speculative and quasi legal status of cryptocurrency makes it difficult to understand how competition rules will affect pricing
however, as far as the current situation is concerned, bitcoin is still the best in terms of traffic volume, penetration and application. However, with the continuous development of cryptocurrency and the improvement of the ecology of other competitive currencies, bitcoin should also speed up its integration into the society, and always ensure its "big brother" status in order to continue to appreciate
regulatory issues
with the popularity of bitcoin in the world, the regulatory agencies of various countries are also racking their brains to deal with this new species. They must figure out several issues surrounding bitcoin, such as how a country's tax system treats this new currency, whether it should regulate cryptocurrency, and how to regulate it
the two events highlight that regulatory measures will have a significant impact on currency prices. Just after Japan announced that bitcoin would be regarded as legal currency, the price of bitcoin increased by 2% in one day. Over the next two months, the global price of bitcoin soared by 160%. When China announced the closure of several major cryptocurrency exchanges and the ban on domestic ICO, the price of bitcoin fell 29% in one day
although many people think that the legislative provisions are unfavorable to the encryption field, the fact is just the opposite. Although bitcoin has been in existence for nearly a decade, it gained fame in 2017 e to the sharp rise in price. In other words, in the eyes of ordinary people, this is a relatively new field
what a new market needs most is clear, concise and powerful regulations to provide potential investors with some security and a framework they can understand
how regulatory regulations deal with issues that may affect the prices of bitcoin and other virtual currencies. Earlier this year, when China announced a ban on initial coin procts (ICO), the price of bitcoin fell 5%, while eth, the second-largest cryptocurrency by market value, fell more than 12%. This is a clear example of how such a direct regulatory move could have a huge impact on the price of the bitcoin
to sum up, the most important factor affecting the price trend of bitcoin is market sentiment. If you can grasp the trend of market sentiment, you can grasp the trend of bitcoin price.
the bitcoin protocol predetermines the number of currencies in circulation to be 21 million. There are less than 4 million bitcoins left to mine, and with the popularity of cryptocurrency, scarcity seems to have an impact on prices
of course, we also see the price drop e to the same mechanism. Once Nobuaki Kobayashi, the trustee of Mt. GOx, declared bankruptcy, a large number of bitcoins were sold, and the price began to fall as the market was expected to flood< Although bitcoin is the most famous cryptocurrency with the largest circulation at present, investors also have hundreds of other options for cryptocurrencies. Generally speaking, the existence of competitors can guarantee the investment value. Without strong alternatives, such as the euro, the Renminbi or the pound, the value of the dollar would be different. However, the speculative and quasi legal status of cryptocurrency makes it difficult to understand how competition rules will affect pricing
however, as far as the current situation is concerned, bitcoin is still the best in terms of traffic volume, penetration and application. However, with the continuous development of cryptocurrency and the improvement of the ecology of other competitive currencies, bitcoin should also speed up its integration into the society, and always ensure its "big brother" status in order to continue to appreciate
regulatory issues
with the popularity of bitcoin in the world, the regulatory agencies of various countries are also racking their brains to deal with this new species. They must figure out several issues surrounding bitcoin, such as how a country's tax system treats this new currency, whether it should regulate cryptocurrency, and how to regulate it
the two events highlight that regulatory measures will have a significant impact on currency prices. Just after Japan announced that bitcoin would be regarded as legal currency, the price of bitcoin increased by 2% in one day. Over the next two months, the global price of bitcoin soared by 160%. When China announced the closure of several major cryptocurrency exchanges and the ban on domestic ICO, the price of bitcoin fell 29% in one day
although many people think that the legislative provisions are unfavorable to the encryption field, the fact is just the opposite. Although bitcoin has been in existence for nearly a decade, it gained fame in 2017 e to the sharp rise in price. In other words, in the eyes of ordinary people, this is a relatively new field
what a new market needs most is clear, concise and powerful regulations to provide potential investors with some security and a framework they can understand
how regulatory regulations deal with issues that may affect the prices of bitcoin and other virtual currencies. Earlier this year, when China announced a ban on initial coin procts (ICO), the price of bitcoin fell 5%, while eth, the second-largest cryptocurrency by market value, fell more than 12%. This is a clear example of how such a direct regulatory move could have a huge impact on the price of the bitcoin
to sum up, the most important factor affecting the price trend of bitcoin is market sentiment. If you can grasp the trend of market sentiment, you can grasp the trend of bitcoin price.
2.
There is only one difference between Keynesian school and Monetary School: whether interest rate plays an important role. Keynesian monetary policy transmission mechanism thinks that interest rate is very important; In contrast, monetary school thinks that interest rate does not play an important role in monetary transmission mechanism
The transmission mechanism of monetary policy of Keynesian school is: the increase or decrease of money supply affects interest rate, the change of interest rate affects investment through marginal benefit of capital, and the increase or decrease of investment further affects total expenditure and total income. The main link of this transmission mechanism is interest rate Different from the Keynesian school, the monetary school thinks that the change of money supply directly affects the expenditure, then the expenditure affects the investment, and finally the total income. Monetarists believe that in the short run, the change of money supply will bring about the change of output, but in the long run it will affect the price level The monetary demand function is a stable function, which refers to the relationship between the average amount of money that is often stored voluntarily and a few independent variables (such as the expected rate of return of wealth or income, bonds, stocks, etc.) that determine it, There is a stable functional relationship which can be estimated by statistical methods (2) the main (though not the only) reason for the change of nominal national income lies in the change of money supply determined by monetary authorities. If the change of money supply will cause the change of money circulation speed in the opposite direction, then the impact of the change of money supply on prices and proction will be uncertain and unpredictable (3) in the short run, the change of money supply mainly affects the output and partly affects the price, but in the long run, the output is completely determined by non monetary factors (such as the quantity of labor and capital, resources and Technology), and the money supply only determines the price level (4) the economic system is stable in essence. As long as the market mechanism can give full play to its role in regulating the economy, the economy will be able to develop stably at an acceptable level of unemployment. Keynesian fiscal and monetary policies in regulating the economy do not rece the economic instability, but strengthen the economic instability3. (1) The main policy characteristics of Keynesian school and Monetary School and the concept of monetary policy effectiveness
Keynesian school and monetary school are two opposite schools. The former holds that interest rate is the main factor affecting the ultimate goal of monetary policy, and the central bank should flexibly choose monetary policy tools according to the changes of economic situation, so as to achieve full employment and maintain economic stability. However, the Monetary School emphasizes the role of money supply and holds that the monetary policy of discretion is invalid in the long run. The central bank should set a fixed growth rate of money supply and keep the price stable with this "single rule"
the so-called effectiveness of monetary policy refers to whether monetary policy can stabilize output and other real economic variables, which is not directly related to whether it can promote economic growth. Whether the monetary policy is effective or not mainly depends on three conditions: 1) whether the currency can influence the output systematically; ② Whether there is a stable relationship between money and output; ③ Can monetary authorities control money as they wish< (2) the differences between Keynesian school and Monetary School on the effectiveness of monetary policy
Keynesian School believes that although there is a time lag in the discretionary monetary policy, it can systematically affect the output and other real economic variables, that is, monetary policy is effective. This mainly includes the following aspects:
① e to the unstable economic operation, there must be a discretionary monetary policy. According to the theory of Keynesian school, the operation of market economy is very unstable, and the long-term growth rate and short-term growth rate often deviate from each other, which leads to economic fluctuations. If the short-term economic growth rate exceeds the long-term growth rate, the social effective demand will exceed the effective supply, which will cause inflation; On the contrary, social effective demand is less than effective supply, which will lead to economic depression and unemployment. Therefore, they advocate adopting fiscal and monetary policies to stabilize the economy and ensure full employment. Because this kind of adjustment is aimed at different economic situations, it is called "discretion" policy“ The monetary policy of "discretionary choice" refers to adopting loose monetary policy, expanding money supply and recing interest rate, so as to stimulate effective demand, increase employment opportunities and promote real output in economic depression; On the contrary, when the economic growth is too fast and inflation occurs, we should adopt a tightening monetary policy to rece the money supply and increase the interest rate, so as to restrain the effective demand and limit the growth of investment and consumption. According to this, we can adjust the amount of money, affect the economic operation, offset the cyclical fluctuations caused by non monetary factors, and realize the stable operation of the national economy< (2) discretionary monetary policy can effectively stabilize economic operation. Keynesian School believes that private economy itself does not have the function of automatic stability, on the contrary, the uncertainty in the market economy will inevitably lead to demand disturbance. If left to nature, there will be cyclical economic fluctuations alternating prosperity and recession. In the view of the advocates of discretionary monetary policy norms, monetary policy itself has an active role in short-term economic stability, and the monetary authority is given extensive power. It can balance the trade-offs according to its own subjective judgment, and counteract the fluctuations and stabilize the economic operation through the "anti economic cycle" action of "acting against the economic wind"< (3) there is a time lag in monetary policy. The time lag of monetary policy is closely related to the effectiveness of monetary policy. For Keynesians, because they assert that the transmission process of monetary policy is indirect (that is, the change of interest rate indirectly affects the real economic variables), and fiscal policy is direct, they believe that it takes at least one year for monetary policy to show its role and effect; It will take four years for the full effect to come into play, that is to say, the effect of monetary policy is relatively slow, while that of fiscal policy is relatively fast. Although they admit that monetary policy has a long time lag, they still insist on the effectiveness of monetary policy, that is, monetary policy can effectively affect the real economic variables and stabilize the economic operation after a period of time
although the monetary school thinks that the effect of monetary policy is faster than that of fiscal policy, e to the existence of long and uncertain time lag and human misjudgment, the "discretionary" monetary policy often fails to stabilize the economy, but becomes the procer of economic instability. That is to say, monetary policy is ineffective in the long run. They expound their policy views from the following aspects:
① they believe that the economy itself has the function of automatic adjustment, and the output can automatically reach the output level of full employment without the policy action of the central bank to stabilize the economy. Theoretically, the economy will show an inherent self-regulation mechanism, which can automatically eliminate the gap between deflation and inflation over time. This mechanism stems from the flexibility of wage and price levels. In the current economic downturn, the existence of involuntary unemployment means that the labor market is in an unbalanced state. Due to the over supply of labor force at the current wage rate, wages tend to decline, which increases the investment willingness of manufacturers and expands the total social supply. As long as the unemployment rate exceeds the natural unemployment rate, that is to say, as long as there is an excessive supply of labor, this process will continue. In the case of sufficient time and complete competition in the labor market, the contraction gap will automatically disappear. Similar process can also make the inflation gap disappear automatically without the help of monetary policy and fiscal policy< (2) they believe that the discretionary choice used to manipulate the aggregate social demand does not work because of the time lag of monetary policy and the uncertainty in economic life. They also believe that this kind of monetary policy will not help stabilize output and employment, and may lead to serious inflation. The main problem faced by monetary policy makers is that the time lag of economic response to policy changes is long and easy to change, and the technical level of economic forecasting is low. Monetarists believe that this has brought great difficulties to the effective implementation of counter cyclical monetary (and fiscal) policies. The existence of time lag makes the active use of monetary policy and fiscal policy more complicated. It is estimated that the time lag of monetary policy will take about one to two years. In addition, the expected role of the micro subject and other political and economic factors also restrict the realization of the effect of monetary policy. Monetarists believe that these problems of monetary policy are difficult to overcome. Generally speaking, the application of fixed currency rule is much better than that of monetary policy. They believe that even if the central bank realizes its main responsibility for stabilizing the economy and adjusts its actions, the rule is the best< In line with the above views, they advocate abandoning the "discretionary" monetary policy and adopting the "single rule" monetary policy. Although they believe that monetary policy can not affect the real economic variables in the long run, that is, monetary policy is ineffective in the long run, they believe that fixed monetary rules can promote the formation of a stable economic environment, improve people's confidence, and thus contribute to long-term planning and investment. Friedman pointed out that all the major inflation in the history of the United States is related to the acceleration of money supply. Similarly, all severe economic contraction is accompanied by an absolute decrease in money supply or a significant slowdown in the growth rate of money supply. The adoption of fixed currency rules can eliminate the volatility of money supply. In this way, people will expect a more stable economic outlook without double-digit inflation and serious recession. Manufacturers foresee that the fluctuation of the economy will be smaller, and their investment expenditure will be stabilized, so as to improve the stability of the economy as a whole.
Keynesian school and monetary school are two opposite schools. The former holds that interest rate is the main factor affecting the ultimate goal of monetary policy, and the central bank should flexibly choose monetary policy tools according to the changes of economic situation, so as to achieve full employment and maintain economic stability. However, the Monetary School emphasizes the role of money supply and holds that the monetary policy of discretion is invalid in the long run. The central bank should set a fixed growth rate of money supply and keep the price stable with this "single rule"
the so-called effectiveness of monetary policy refers to whether monetary policy can stabilize output and other real economic variables, which is not directly related to whether it can promote economic growth. Whether the monetary policy is effective or not mainly depends on three conditions: 1) whether the currency can influence the output systematically; ② Whether there is a stable relationship between money and output; ③ Can monetary authorities control money as they wish< (2) the differences between Keynesian school and Monetary School on the effectiveness of monetary policy
Keynesian School believes that although there is a time lag in the discretionary monetary policy, it can systematically affect the output and other real economic variables, that is, monetary policy is effective. This mainly includes the following aspects:
① e to the unstable economic operation, there must be a discretionary monetary policy. According to the theory of Keynesian school, the operation of market economy is very unstable, and the long-term growth rate and short-term growth rate often deviate from each other, which leads to economic fluctuations. If the short-term economic growth rate exceeds the long-term growth rate, the social effective demand will exceed the effective supply, which will cause inflation; On the contrary, social effective demand is less than effective supply, which will lead to economic depression and unemployment. Therefore, they advocate adopting fiscal and monetary policies to stabilize the economy and ensure full employment. Because this kind of adjustment is aimed at different economic situations, it is called "discretion" policy“ The monetary policy of "discretionary choice" refers to adopting loose monetary policy, expanding money supply and recing interest rate, so as to stimulate effective demand, increase employment opportunities and promote real output in economic depression; On the contrary, when the economic growth is too fast and inflation occurs, we should adopt a tightening monetary policy to rece the money supply and increase the interest rate, so as to restrain the effective demand and limit the growth of investment and consumption. According to this, we can adjust the amount of money, affect the economic operation, offset the cyclical fluctuations caused by non monetary factors, and realize the stable operation of the national economy< (2) discretionary monetary policy can effectively stabilize economic operation. Keynesian School believes that private economy itself does not have the function of automatic stability, on the contrary, the uncertainty in the market economy will inevitably lead to demand disturbance. If left to nature, there will be cyclical economic fluctuations alternating prosperity and recession. In the view of the advocates of discretionary monetary policy norms, monetary policy itself has an active role in short-term economic stability, and the monetary authority is given extensive power. It can balance the trade-offs according to its own subjective judgment, and counteract the fluctuations and stabilize the economic operation through the "anti economic cycle" action of "acting against the economic wind"< (3) there is a time lag in monetary policy. The time lag of monetary policy is closely related to the effectiveness of monetary policy. For Keynesians, because they assert that the transmission process of monetary policy is indirect (that is, the change of interest rate indirectly affects the real economic variables), and fiscal policy is direct, they believe that it takes at least one year for monetary policy to show its role and effect; It will take four years for the full effect to come into play, that is to say, the effect of monetary policy is relatively slow, while that of fiscal policy is relatively fast. Although they admit that monetary policy has a long time lag, they still insist on the effectiveness of monetary policy, that is, monetary policy can effectively affect the real economic variables and stabilize the economic operation after a period of time
although the monetary school thinks that the effect of monetary policy is faster than that of fiscal policy, e to the existence of long and uncertain time lag and human misjudgment, the "discretionary" monetary policy often fails to stabilize the economy, but becomes the procer of economic instability. That is to say, monetary policy is ineffective in the long run. They expound their policy views from the following aspects:
① they believe that the economy itself has the function of automatic adjustment, and the output can automatically reach the output level of full employment without the policy action of the central bank to stabilize the economy. Theoretically, the economy will show an inherent self-regulation mechanism, which can automatically eliminate the gap between deflation and inflation over time. This mechanism stems from the flexibility of wage and price levels. In the current economic downturn, the existence of involuntary unemployment means that the labor market is in an unbalanced state. Due to the over supply of labor force at the current wage rate, wages tend to decline, which increases the investment willingness of manufacturers and expands the total social supply. As long as the unemployment rate exceeds the natural unemployment rate, that is to say, as long as there is an excessive supply of labor, this process will continue. In the case of sufficient time and complete competition in the labor market, the contraction gap will automatically disappear. Similar process can also make the inflation gap disappear automatically without the help of monetary policy and fiscal policy< (2) they believe that the discretionary choice used to manipulate the aggregate social demand does not work because of the time lag of monetary policy and the uncertainty in economic life. They also believe that this kind of monetary policy will not help stabilize output and employment, and may lead to serious inflation. The main problem faced by monetary policy makers is that the time lag of economic response to policy changes is long and easy to change, and the technical level of economic forecasting is low. Monetarists believe that this has brought great difficulties to the effective implementation of counter cyclical monetary (and fiscal) policies. The existence of time lag makes the active use of monetary policy and fiscal policy more complicated. It is estimated that the time lag of monetary policy will take about one to two years. In addition, the expected role of the micro subject and other political and economic factors also restrict the realization of the effect of monetary policy. Monetarists believe that these problems of monetary policy are difficult to overcome. Generally speaking, the application of fixed currency rule is much better than that of monetary policy. They believe that even if the central bank realizes its main responsibility for stabilizing the economy and adjusts its actions, the rule is the best< In line with the above views, they advocate abandoning the "discretionary" monetary policy and adopting the "single rule" monetary policy. Although they believe that monetary policy can not affect the real economic variables in the long run, that is, monetary policy is ineffective in the long run, they believe that fixed monetary rules can promote the formation of a stable economic environment, improve people's confidence, and thus contribute to long-term planning and investment. Friedman pointed out that all the major inflation in the history of the United States is related to the acceleration of money supply. Similarly, all severe economic contraction is accompanied by an absolute decrease in money supply or a significant slowdown in the growth rate of money supply. The adoption of fixed currency rules can eliminate the volatility of money supply. In this way, people will expect a more stable economic outlook without double-digit inflation and serious recession. Manufacturers foresee that the fluctuation of the economy will be smaller, and their investment expenditure will be stabilized, so as to improve the stability of the economy as a whole.
4. The debate between Keynesianism and monetarism on macroeconomic policy
the emergence of monetarism in the 1950s and 1960s aims to criticize Keynesian economic policy and theory. Keynesianism believes that the most effective means to control economic fluctuations is fiscal policy, and the main goal of using monetary policy is to control interest rates. Due to the long-term implementation of fiscal policy and the long-term interest rection to stimulate investment, western countries ignore the inflation caused by the increase of money quantity in their efforts to increase national income. Monetarism attempts to criticize Keynesianism in theory [2], which shows that the quantity of money has a direct impact on the price level in the long run, and is the main reason for the change of aggregate demand. Therefore, in policy, monetarism opposes the economic policy that Keynesianism considered to use, and advocates the economic policy of stabilizing money supply: single policy rule. The theoretical basis of monetarism against Keynesian policy is as follows:
(1) the main difference between Keynesian monetary theory and classical monetary quantity theory is that the classical monetary quantity theory holds that the price level depends on the monetary quantity; On the contrary, the result of the change of money quantity is the change of price level, not the change of national income. Keynes' monetary theory holds that in the case of underemployment, the change of money quantity can lead to the change of real national income. The main reason is that the change of money quantity can lead to the change of interest rate, and then affect the change of investment, and finally lead to the change of national income. Monetarism tries to make the theory of money quantity under complicated assumptions to regain the same view as the classical theory of money: on the one hand, from a long-term point of view, the ultimate result of the increase of money quantity is the change of price level rather than the change of real national income; On the other hand, monetarism also admits that the change of money quantity may lead to the change of national income in the short term
monetarism holds that the money demand function is stable (under the given national income of money, or under the given p, y conditions), while Keynesian theory holds that the money demand function is unstable (under the P, y stable conditions, because the money demand in the financial market changes with the interest rate, the speed of money circulation is unstable). Another way to express this difference is that Keynesianism believes that the velocity of money's income circulation V will change both in the long run and in the short run, so that money supply M can affect the real national income in the long run and in the short run. Monetarism holds that the speed of money's income circulation may change in the short term. In the long run, it is stable, so the increase of money quantity may lead to the increase of real national income in the short run, but the final result is still the rise of price level
(2) there are similarities and differences in the causes of economic fluctuations. Both monetarism and Keynesianism believe that demand is the main cause of economic fluctuation, and economic fluctuation should be controlled from the perspective of demand management. However, there are some differences in their views on the causes of economic fluctuations< According to Keynesianism, investment in total demand (total expenditure) is an extremely unstable expenditure, which is easily affected by various factors (such as profit expectation, interest and income). The government's fiscal behavior is the most direct and effective way to offset the fluctuation of private sector investment, so fiscal policy is the most effective way to control the change of national income. In addition, because private sector investment is a function of interest rate, the government's money supply behavior can change interest rate and indirectly affect private sector investment, so monetary policy can also stabilize investment under certain conditions
according to monetarism; Because the function of money demand is stable, the total expenditure or demand of money depends on the level of money supply or credit, so the change of money supply or credit is the main reason for the change of total demand. Therefore, monetary policy is the most effective and direct way to stabilize the total demand< (3) monetarism thinks that the change of interest rate has a great influence on investment, so the is curve tends to a horizontal line; On the contrary, l (R) is less affected by interest rate, so LM Curve tends to be a vertical line. On the contrary, Keynesianism thinks that investment is not affected by interest rate, while l (R) is affected by interest rate. So is curve tends to a vertical knot and LM Curve tends to a horizontal line. Monetarism holds that fiscal policy has little effect on controlling aggregate demand, while monetary policy has obvious effect. On the contrary, Keynesianism thinks that monetary policy has little effect on controlling aggregate demand, while fiscal policy has obvious effect. The two theories try to further demonstrate their respective policy propositions from the characteristics of is and LM curves< (4) Keynesianism advocated the economic policy of government intervention in economy. The most basic reason is that capitalist economy itself can not reach the equilibrium state of full employment, while monetarism puts forward the natural rate hypothesis [3]. This paper attempts to re affirm the inherent stability of the capitalist economic system and its ability to achieve full employment by itself, thus advocating the economic policy of non intervention by the government, and points out that Keynes's economic policy not only failed to control economic fluctuations, but may be one of the causes of economic fluctuations, because of the lagging effect of economic policies
the above differences make the economic policy put forward by Monetarism to keep the money supply stable and increase in stability. The growth rate is equal to the growth rate of real national income plus the inflation rate. Its purpose is to make the money supply not restrict the natural growth of national income.
the emergence of monetarism in the 1950s and 1960s aims to criticize Keynesian economic policy and theory. Keynesianism believes that the most effective means to control economic fluctuations is fiscal policy, and the main goal of using monetary policy is to control interest rates. Due to the long-term implementation of fiscal policy and the long-term interest rection to stimulate investment, western countries ignore the inflation caused by the increase of money quantity in their efforts to increase national income. Monetarism attempts to criticize Keynesianism in theory [2], which shows that the quantity of money has a direct impact on the price level in the long run, and is the main reason for the change of aggregate demand. Therefore, in policy, monetarism opposes the economic policy that Keynesianism considered to use, and advocates the economic policy of stabilizing money supply: single policy rule. The theoretical basis of monetarism against Keynesian policy is as follows:
(1) the main difference between Keynesian monetary theory and classical monetary quantity theory is that the classical monetary quantity theory holds that the price level depends on the monetary quantity; On the contrary, the result of the change of money quantity is the change of price level, not the change of national income. Keynes' monetary theory holds that in the case of underemployment, the change of money quantity can lead to the change of real national income. The main reason is that the change of money quantity can lead to the change of interest rate, and then affect the change of investment, and finally lead to the change of national income. Monetarism tries to make the theory of money quantity under complicated assumptions to regain the same view as the classical theory of money: on the one hand, from a long-term point of view, the ultimate result of the increase of money quantity is the change of price level rather than the change of real national income; On the other hand, monetarism also admits that the change of money quantity may lead to the change of national income in the short term
monetarism holds that the money demand function is stable (under the given national income of money, or under the given p, y conditions), while Keynesian theory holds that the money demand function is unstable (under the P, y stable conditions, because the money demand in the financial market changes with the interest rate, the speed of money circulation is unstable). Another way to express this difference is that Keynesianism believes that the velocity of money's income circulation V will change both in the long run and in the short run, so that money supply M can affect the real national income in the long run and in the short run. Monetarism holds that the speed of money's income circulation may change in the short term. In the long run, it is stable, so the increase of money quantity may lead to the increase of real national income in the short run, but the final result is still the rise of price level
(2) there are similarities and differences in the causes of economic fluctuations. Both monetarism and Keynesianism believe that demand is the main cause of economic fluctuation, and economic fluctuation should be controlled from the perspective of demand management. However, there are some differences in their views on the causes of economic fluctuations< According to Keynesianism, investment in total demand (total expenditure) is an extremely unstable expenditure, which is easily affected by various factors (such as profit expectation, interest and income). The government's fiscal behavior is the most direct and effective way to offset the fluctuation of private sector investment, so fiscal policy is the most effective way to control the change of national income. In addition, because private sector investment is a function of interest rate, the government's money supply behavior can change interest rate and indirectly affect private sector investment, so monetary policy can also stabilize investment under certain conditions
according to monetarism; Because the function of money demand is stable, the total expenditure or demand of money depends on the level of money supply or credit, so the change of money supply or credit is the main reason for the change of total demand. Therefore, monetary policy is the most effective and direct way to stabilize the total demand< (3) monetarism thinks that the change of interest rate has a great influence on investment, so the is curve tends to a horizontal line; On the contrary, l (R) is less affected by interest rate, so LM Curve tends to be a vertical line. On the contrary, Keynesianism thinks that investment is not affected by interest rate, while l (R) is affected by interest rate. So is curve tends to a vertical knot and LM Curve tends to a horizontal line. Monetarism holds that fiscal policy has little effect on controlling aggregate demand, while monetary policy has obvious effect. On the contrary, Keynesianism thinks that monetary policy has little effect on controlling aggregate demand, while fiscal policy has obvious effect. The two theories try to further demonstrate their respective policy propositions from the characteristics of is and LM curves< (4) Keynesianism advocated the economic policy of government intervention in economy. The most basic reason is that capitalist economy itself can not reach the equilibrium state of full employment, while monetarism puts forward the natural rate hypothesis [3]. This paper attempts to re affirm the inherent stability of the capitalist economic system and its ability to achieve full employment by itself, thus advocating the economic policy of non intervention by the government, and points out that Keynes's economic policy not only failed to control economic fluctuations, but may be one of the causes of economic fluctuations, because of the lagging effect of economic policies
the above differences make the economic policy put forward by Monetarism to keep the money supply stable and increase in stability. The growth rate is equal to the growth rate of real national income plus the inflation rate. Its purpose is to make the money supply not restrict the natural growth of national income.
5. Keynesian money demand theory and its development
Keynesian money demand theory is mainly based on the liquidity preference theory put forward in his famous book employment interest and currency general theory
according to the analysis of the general theory, people's motivation of holding money includes: Trading motivation of holding money, cautious motivation of holding money and speculative motivation of holding money, Accordingly, people's demand for holding money includes: the demand for currency trading, the demand for prudence and the demand for speculation
among the three kinds of demand, it is generally assumed that trading demand and speculative demand are additive and separable, and prudent demand should not be separated separately, and should be attributed to trading demand and speculative demand respectively. Therefore, Keynes' money demand consists of the following two parts: M = M1 + M2 = L1 (y) + L2 (R), where L1 (y) represents trading demand related to income y, L2 (R) represents speculative money demand related to interest rate R< In general, monetary school emphasizes that money demand is the stable function of most variables (the most important of which is permanent income) that can be observed. Because the interest elasticity of money demand is very low (that is, the substitution effect between money and other financial assets is very small), the main way to keep the balance of money supply and demand is to change the income level accordingly. It is concluded that money supply is not only an important policy variable, but also the best policy indicator.
Keynesian money demand theory is mainly based on the liquidity preference theory put forward in his famous book employment interest and currency general theory
according to the analysis of the general theory, people's motivation of holding money includes: Trading motivation of holding money, cautious motivation of holding money and speculative motivation of holding money, Accordingly, people's demand for holding money includes: the demand for currency trading, the demand for prudence and the demand for speculation
among the three kinds of demand, it is generally assumed that trading demand and speculative demand are additive and separable, and prudent demand should not be separated separately, and should be attributed to trading demand and speculative demand respectively. Therefore, Keynes' money demand consists of the following two parts: M = M1 + M2 = L1 (y) + L2 (R), where L1 (y) represents trading demand related to income y, L2 (R) represents speculative money demand related to interest rate R< In general, monetary school emphasizes that money demand is the stable function of most variables (the most important of which is permanent income) that can be observed. Because the interest elasticity of money demand is very low (that is, the substitution effect between money and other financial assets is very small), the main way to keep the balance of money supply and demand is to change the income level accordingly. It is concluded that money supply is not only an important policy variable, but also the best policy indicator.
6. Firstly, money supply is an exogenous variable controlled by the central bank
2. Secondly, the change of money quantity leads to the change of price through the change of interest rate
3. Thirdly, when there is unemployment, the amount of employment changes in the same proportion with the amount of money
4. Once full employment is achieved, the price changes in the same proportion with the amount of money
under the normal situation of less than full employment, the adoption of inflationary monetary policy will only lead to half inflation with less advantages and less disadvantages, which will not bring about the evil effect of real inflation, but can stimulate economic development< Characteristics:
1. Expansionary monetary policy
the ultimate goal of Keynesian theoretical system is to achieve full employment, so we need to increase effective demand and start interest rate as the main lever. He believes that in the normal situation of less than full employment, there are two ways to rece interest rates: "one is to rece wages while keeping the amount of money unchanged; The second is to increase the amount of money and keep wages unchanged. " The former is a kind of flexible wage policy, while the latter is a kind of flexible monetary policy. As far as they increase the amount of money (absolute or relative) so as to rece the interest rate, their effects are exactly the same in theory, but they are quite different in practice. Keynes thinks that the flexible monetary policy is more sensible, feasible and effective than the flexible wage policy. After comparison and analysis, he advocated the adoption of rigid wage policy and expansionary monetary policy, not only because it is feasible, simple and effective in practice. Moreover, it has sufficient theoretical basis, especially his management currency theory and semi inflation theory, which states that under the normal condition of less than full employment, this will not bring about the evil effect of real inflation, but can proce the expected effect of stimulating the economy and increasing employment, output and income< The limitation of monetary policy and the role of other policies
Keynes proposed the expansionary monetary policy, but he also thought that in order to achieve full employment, it is not enough to adopt this monetary policy alone, especially in the economic crisis, the increased amount of money may be absorbed by the increased liquidity preference, and has no impact on interest rates, So it has no effect on the actual investment. Therefore, we must adopt other policies at the same time, the most important of which is deficit fiscal policy. Deficit fiscal policy means that the state can expand fiscal expenditure beyond the limit of fiscal revenue, because Keynes believes that the root cause of capitalist economy lies in the lack of effective demand, which is difficult to be solved by the spontaneous adjustment of residents or enterprises, and can only be realized by the intervention of the government. On the one hand, the government can directly expand investment; On the other hand, government investment can stimulate private investment.
2. Secondly, the change of money quantity leads to the change of price through the change of interest rate
3. Thirdly, when there is unemployment, the amount of employment changes in the same proportion with the amount of money
4. Once full employment is achieved, the price changes in the same proportion with the amount of money
under the normal situation of less than full employment, the adoption of inflationary monetary policy will only lead to half inflation with less advantages and less disadvantages, which will not bring about the evil effect of real inflation, but can stimulate economic development< Characteristics:
1. Expansionary monetary policy
the ultimate goal of Keynesian theoretical system is to achieve full employment, so we need to increase effective demand and start interest rate as the main lever. He believes that in the normal situation of less than full employment, there are two ways to rece interest rates: "one is to rece wages while keeping the amount of money unchanged; The second is to increase the amount of money and keep wages unchanged. " The former is a kind of flexible wage policy, while the latter is a kind of flexible monetary policy. As far as they increase the amount of money (absolute or relative) so as to rece the interest rate, their effects are exactly the same in theory, but they are quite different in practice. Keynes thinks that the flexible monetary policy is more sensible, feasible and effective than the flexible wage policy. After comparison and analysis, he advocated the adoption of rigid wage policy and expansionary monetary policy, not only because it is feasible, simple and effective in practice. Moreover, it has sufficient theoretical basis, especially his management currency theory and semi inflation theory, which states that under the normal condition of less than full employment, this will not bring about the evil effect of real inflation, but can proce the expected effect of stimulating the economy and increasing employment, output and income< The limitation of monetary policy and the role of other policies
Keynes proposed the expansionary monetary policy, but he also thought that in order to achieve full employment, it is not enough to adopt this monetary policy alone, especially in the economic crisis, the increased amount of money may be absorbed by the increased liquidity preference, and has no impact on interest rates, So it has no effect on the actual investment. Therefore, we must adopt other policies at the same time, the most important of which is deficit fiscal policy. Deficit fiscal policy means that the state can expand fiscal expenditure beyond the limit of fiscal revenue, because Keynes believes that the root cause of capitalist economy lies in the lack of effective demand, which is difficult to be solved by the spontaneous adjustment of residents or enterprises, and can only be realized by the intervention of the government. On the one hand, the government can directly expand investment; On the other hand, government investment can stimulate private investment.
7. Keynes' money demand theory is mainly based on the liquidity preference theory put forward in his famous book "employment interest and general theory of money". Because Keynes learned from Marshall, his money theory is to some extent the logical development of Cambridge's money demand theory. In the quantity theory of money of Cambridge school, the question raised is why people hold money. The answer to this question directly leads to Cambridge's analysis of the transaction demand of people holding money. However, the defect of Cambridge's theory is that it does not make an in-depth analysis. Different from the predecessors in Cambridge, Keynes analyzed the motives of people holding money in detail, and the analysis of people holding money was more accurate. According to the analysis of the general theory, people's motives of holding money include: Trading motives of holding money, cautious motives of holding money and speculative motives of holding money. Correspondingly, people's demands of holding money include: Trading demands of money, cautious demands and speculative demands. Among the three kinds of demand, it is generally assumed that trading demand and speculative demand are additive and separable, while prudent demand should not be separated from trading demand and speculative demand separately. Therefore, Keynes' money demand consists of the following two parts: M = M1 + M2 = L1 (y) + L2 (R), where L1 (y) represents the trading demand related to income y, L2 (R) represents speculative money demand related to interest rate R. Because of the central role of Keynes' money demand theory in modern macroeconomics and macroeconomic policy-making, it is very important to further improve and deepen Keynes' liquidity preference theory, which has become the mainstream of the development of money theory from postwar to 1970s
the first development of Keynesian monetary theory is a more detailed study of transaction motivation. In principle, Keynes believed that people's motivation for holding money mainly depends on the scale variable. Although Keynes did not deny that the demand for trading is related to interest rate, he did not give a specific and clear relationship. To solve this problem, Baumol (1952) and Tobin (1956) gave a general answer based on the inventory cost model. Baumol (1952) and Tobin (1956) assumed that whether people hold money or not includes two kinds of related expenses: the opportunity loss of holding cash and the commission expense of disposing securities. Because these two kinds of expenses are mutually increasing and decreasing, indivial decision-making will face choices and trade-offs, and the total cost will be minimized. From this we can derive Baumol's famous square root law: M = (2BT) / R, where B represents the commission expense of each transaction, R stands for the interest rate of securities. This formula shows that the elasticity of money demand with income T and interest rate is 1 / 2, which means that money is not a luxury. Its deeper meaning is that the more balanced the income distribution is, the greater the total money demand is, or the more uneven the income distribution is, the lower the total money demand is
the motive of prudence mainly depends on the uncertainty of the future. As Keynes pointed out, "the currency held by this motive is to guard against the uncertain expenditure or the favorable purchase opportunity that can not be reversed." However, Keynes's analysis of how uncertainty affects money demand has not been detailed. As a result, later economists expanded and further standardized in different directions. One of the most famous extensions is Tobin's quadrant analysis of money demand. Tobin skillfully put prudent demand, trading demand and speculative demand into a unified analysis framework, And the prudent motive is limited to the uncertainty of interest rate. The other development of prudent demand model is directly based on the uncertainty of income or expenditure, such as the prudent money demand model proposed by Whelan (1966). The model assumes that the net expenditure after the balance of revenue and expenditure follows a certain probability distribution with zero as the center, σ For the standard deviation of net expenditure, by setting an appropriate risk probability, Whelan derived the money demand formula of the cube root law: M = 2 σ 2br13
speculative motivation is one of Keynes's most important motivations. It is an important feature that distinguishes Keynes' monetary theory from other monetary theories. However, Keynes's speculative model is a pure speculative money demand model. In this model, investors are faced with either or choice. With the help of expected interest rate, indivials can either hold all the money, Or all the bonds, indivials are blind speculators, rather than diversified speculators. To overcome this defect, Tobin (1958) developed Keynes's pure speculative money demand model based on Markowitz's portfolio theory (1952). This theory can be explained by the separability theorem. First, investors determine the efficient set or efficient boundary of assets according to the returns and risks of various risky assets. This boundary has nothing to do with indivial preferences. After the introction of risk-free currency, investors' efficient set becomes a straight line starting from the origin and tangent to the efficient boundary. Second, which point on the straight line an indivial chooses as the optimal decision-making point depends on the indifference curve of indivial risk return. The tangent point between the indifference curve and the straight line is the investor's optimal choice. This point determines the proportion of money in all financial assets, and the speculative money demand is determined by this proportion
the first development of Keynesian monetary theory is a more detailed study of transaction motivation. In principle, Keynes believed that people's motivation for holding money mainly depends on the scale variable. Although Keynes did not deny that the demand for trading is related to interest rate, he did not give a specific and clear relationship. To solve this problem, Baumol (1952) and Tobin (1956) gave a general answer based on the inventory cost model. Baumol (1952) and Tobin (1956) assumed that whether people hold money or not includes two kinds of related expenses: the opportunity loss of holding cash and the commission expense of disposing securities. Because these two kinds of expenses are mutually increasing and decreasing, indivial decision-making will face choices and trade-offs, and the total cost will be minimized. From this we can derive Baumol's famous square root law: M = (2BT) / R, where B represents the commission expense of each transaction, R stands for the interest rate of securities. This formula shows that the elasticity of money demand with income T and interest rate is 1 / 2, which means that money is not a luxury. Its deeper meaning is that the more balanced the income distribution is, the greater the total money demand is, or the more uneven the income distribution is, the lower the total money demand is
the motive of prudence mainly depends on the uncertainty of the future. As Keynes pointed out, "the currency held by this motive is to guard against the uncertain expenditure or the favorable purchase opportunity that can not be reversed." However, Keynes's analysis of how uncertainty affects money demand has not been detailed. As a result, later economists expanded and further standardized in different directions. One of the most famous extensions is Tobin's quadrant analysis of money demand. Tobin skillfully put prudent demand, trading demand and speculative demand into a unified analysis framework, And the prudent motive is limited to the uncertainty of interest rate. The other development of prudent demand model is directly based on the uncertainty of income or expenditure, such as the prudent money demand model proposed by Whelan (1966). The model assumes that the net expenditure after the balance of revenue and expenditure follows a certain probability distribution with zero as the center, σ For the standard deviation of net expenditure, by setting an appropriate risk probability, Whelan derived the money demand formula of the cube root law: M = 2 σ 2br13
speculative motivation is one of Keynes's most important motivations. It is an important feature that distinguishes Keynes' monetary theory from other monetary theories. However, Keynes's speculative model is a pure speculative money demand model. In this model, investors are faced with either or choice. With the help of expected interest rate, indivials can either hold all the money, Or all the bonds, indivials are blind speculators, rather than diversified speculators. To overcome this defect, Tobin (1958) developed Keynes's pure speculative money demand model based on Markowitz's portfolio theory (1952). This theory can be explained by the separability theorem. First, investors determine the efficient set or efficient boundary of assets according to the returns and risks of various risky assets. This boundary has nothing to do with indivial preferences. After the introction of risk-free currency, investors' efficient set becomes a straight line starting from the origin and tangent to the efficient boundary. Second, which point on the straight line an indivial chooses as the optimal decision-making point depends on the indifference curve of indivial risk return. The tangent point between the indifference curve and the straight line is the investor's optimal choice. This point determines the proportion of money in all financial assets, and the speculative money demand is determined by this proportion
8. The main contents of Keynes' money demand theory are as follows:
three motives of money demand: transaction motive, prevention motive and speculation motive
the money demand of the first motive is relatively stable and predictable
the money demand of the third motivation is unstable, because it is closely related to people's expectation of future money and is greatly influenced by subjective factors such as psychological expectation
money demand function: MD = M1 + M2 = L1 (y) + L2 (I) = l (y, I)
the characteristics of Keynesian money demand theory:
one of the remarkable characteristics of Keynesian money demand theory is that the speculative demand for money is included in the scope of money demand. Therefore, not only the scale of commodity transaction and its price level affect the money demand, but also the monetary demand, Moreover, the change of interest rate is also an important factor affecting money demand. According to the above ideas, Keynes put forward an important policy theory: that is, the government can rece interest rates, expand money supply, promote enterprises to expand investment, increase employment and output, and achieve the goal of monetary policy in the case of insufficient domestic effective demand<
give full play to yourself
adopt it
three motives of money demand: transaction motive, prevention motive and speculation motive
the money demand of the first motive is relatively stable and predictable
the money demand of the third motivation is unstable, because it is closely related to people's expectation of future money and is greatly influenced by subjective factors such as psychological expectation
money demand function: MD = M1 + M2 = L1 (y) + L2 (I) = l (y, I)
the characteristics of Keynesian money demand theory:
one of the remarkable characteristics of Keynesian money demand theory is that the speculative demand for money is included in the scope of money demand. Therefore, not only the scale of commodity transaction and its price level affect the money demand, but also the monetary demand, Moreover, the change of interest rate is also an important factor affecting money demand. According to the above ideas, Keynes put forward an important policy theory: that is, the government can rece interest rates, expand money supply, promote enterprises to expand investment, increase employment and output, and achieve the goal of monetary policy in the case of insufficient domestic effective demand<
give full play to yourself
adopt it
9. In the case of stable market supply, we assume that the market only needs 1W yuan to ensure the normal order of the market. But at this time, the state issued 2W paper money, which would cause currency inflation in the market. Under the normal order of market economy, what can be bought with 1 yuan will expand to 2 yuan. If our income remains unchanged at this time, then our purchasing power will drop. For example, what we used to buy for 100 yuan can only buy the equivalent of 50 yuan now. Naturally, our living standard will drop!
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