Theoretical Analysis of the Demand for Money

Federal Reserve Bank of Richmond Working Paper No. 86-3

27 Pages Posted: 24 Oct 2012

See all articles by Bennett T. McCallum

Bennett T. McCallum

Carnegie Mellon University - David A. Tepper School of Business; National Bureau of Economic Research (NBER)

Marvin Goodfriend

Carnegie Mellon University - David A. Tepper School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: July 1, 1986

Abstract

In any discussion of the demand for money it is important to be clear about the concept of money that is being utilized; otherwise, misunderstandings can arise because of the various possible meanings that readers could have in mind. Here the term will be taken to refer to an economy's medium of exchange, that is to a tangible asset that is generally accepted in payment for any commodity. Money thus conceived will also serve as a store of value, of course, but may be of minor importance to the economy in that capacity. The monetary asset will usually also serve as the economy's medium of account -- i.e., prices will be quoted in terms of money -- since additional accounting costs would be incurred if the unit of account were a quantity of some asset other than money. The medium-of-account role is, however, not logically tied to the medium of exchange (Wicksell, 1906; Niehans, 1978).

Suggested Citation

McCallum, Bennett T. and Goodfriend, Marvin, Theoretical Analysis of the Demand for Money (July 1, 1986). Federal Reserve Bank of Richmond Working Paper No. 86-3. Available at SSRN: https://ssrn.com/abstract=2120870 or http://dx.doi.org/10.2139/ssrn.2120870

Bennett T. McCallum (Contact Author)

Carnegie Mellon University - David A. Tepper School of Business ( email )

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National Bureau of Economic Research (NBER)

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Marvin Goodfriend

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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