Money. Credit. Banks. Quantitative laws of money circulation (lecture notes)

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Money. Credit. Banks. Quantitative laws of money circulation (lecture notes)

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Quantitative laws of circulation of money

Law is the connection of phenomena. This connection may be superficial or substantial. Surface relationships express empirical laws (Gresham's law, monetary rule). Internal causal relationships express essential laws (Fischer's formula, etc.). In form, the essential laws appear as quantitative estimates of the money supply, necessary and sufficient in order to realize the mass of commodities, ensure the purchasing power of money and maintain a stable balance between them.

Classical equation of exchange ("Fisher's formula"). The logic of the classical equation of exchange is based on three premises:

a) the concept of perfect competition, in which buyers and sellers form an equilibrium price level;

b) economic entities in the market pursue only personal gain;

c) buyers and sellers are guided by real, not nominal prices. MV = PQ (M - mass of money in circulation; V - velocity of circulation of money; P - price of goods; Q - mass of goods in circulation). The classical equation of exchange takes into account only one function of money - the medium of exchange. Other functions (means of storage, means of payment, world money) are left unattended.

Marxist interpretation of the amount of full-fledged money needed for circulation. The formula for the amount of full-fledged money necessary to ensure commodity circulation and payments is based on the following premises:

a) labor theory of value;

b) gold standard;

c) taking into account not only the function of money as a means of circulation, but also its function as a means of accumulation and payment. The amount of full-fledged money necessary to ensure commodity circulation is presented in the form of the formula: M^D \uXNUMXd (T + P - K - B) / O (where M^D - the volume of demand for full-fledged money, presented by commodity circulation; T - the sum of the prices of goods sold; P - payments for which the deadline has come; K - goods sold on credit; B - mutually repaying payments, mutual offsets; O - the average number of turnovers of the money supply for the period). In this formula, full-fledged money refers to gold and silver money. This poses an obstacle to the practical application of the theory.

Keynesian version of the exchange formula. This formula relates the accumulation of liquid funds to the norm of required bank reserves. The formula takes the form: n = p(k+rk') (where n is the amount of money in circulation; p is the "cost of living" index, the price of a unit of consumption; k - units of consumption in the form of cash; k' - bank deposits; r - the norm of required bank reserves) This is a variation of the Fisher formula.

Cambridge equation. It is based on the fact that 1) business entities are guided by a transactional motive (accumulation of money for a planned expensive purchase) and 2) a precautionary motive (accumulation of liquid funds for unforeseen expenses). This concept is called the behaviorist version of the quantity theory of money: M^d = kRP (where M^d - the total amount of money that all economic entities tend to keep (demand for money); k, - coefficient characterizing that part of the final product Py, which people prefer to keep in liquid form; 0

Monetarist version of the quantity theory of money. Monetarists led by M. Friedman proposed a new interpretation of the exchange formula: MV = PY (where M is the money supply; V is the velocity of circulation of income; P is the price level; Y is the rate (flow) of real income).

Author: Shevchuk D.A.

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