A Cyeclical Interpretation of Money
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A Cyeclical Interpretation of Money
Allsbrook, Odgen O. | Gilliam, Kenneth P.
Credit and Capital Markets – Kredit und Kapital, Vol. 21 (1988), Iss. 2 : pp. 243–252
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Prof. Odgen O. Allsbrook, The University of Georgia, Department of Economics, Brooks Hall, Athens, Georgia 30602, USA
Prof. Kenneth P. Gilliam, The University of Georgia, Department of Economics, Brooks Hall, Athens, Georgia 30602, USA
References
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Allsbrook, O. O.: "Real Velocity and Crowding-In," South African Journal of Economics, 54, June 1986, pp. 222 - 224.
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Conard, Joseph W.: The Behavior of Interest Rates (New York: Columbia University Press for NBER, 1966).
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Kessel, Reuben: The Cyclical Behavior of the Term Structure of Interest Rates, Occasional Paper 91 (New York: NBER, December 1965).
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Malkiel, Burton Gordon: The Term Structure of Interest Rates: Expectations and Behavior Patterns, (Princeton: University Press, 1966).
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Abstract
A Cyclical Interpretation of Money
This article develops a cyclical analysis of velocity as it varies over a stylized business cycle. Velocity varies historically in a predictable cyclical fashion, so the IS-LM paradigm is employed to illustrate why these changes are expected. A critical distinction lies in the difference between the stock of money and the flow of money. The former is exogenous, while the latter is endogenous and includes changes in velocity. The two phases of the cycle rationalized in this manner are disinflation and accelerating inflation. The expected effects on yield curves during these phases are drawn. Thus an attempt is made to subject the financial side of the economy (LM) to the same flexibility that the expenditure side of the economy (15) has been subjected by the alternative consumption/saving hypotheses.