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The Equation of Exchange Revisited

Kaiser, Dirk

Credit and Capital Markets – Kredit und Kapital, Vol. 44 (2011), Iss. 4: pp. 491–507

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Prof. Dr. Dirk Kaiser, Hochschule Bochum, Fachbereich Wirtschaft, Lehrgebiet für Betriebswirtschaftslehre, insb. Finanzmanagement, Banken und Versicherungen, Lennershofstraße 140, D-44801 Bochum

Abstract

The Equation of Exchange Revisited

The article presents a more general version of the equation of exchange providing separately for a financial turnover of money as well as a corresponding financial velocity of money. This sheds a special theoretical light on the easy monetary policy implemented by the Federal Reserve between 2001 and 2004 and the enlargement of the financial sphere in the United States, which persisted until the recent financial crisis broke out – to become an international economic crisis in due course. (JEL E40, E52, G01, N12)