Interest Rate and the Money Demand Function (Can the Paradigm Be Changed?)

• Authors: Koronowski A. K.
• Languages of publication: PL

Abstracts

EN

The prevailing theoretical paradigm stipulating that demand for money negatively depends on nominal interest rate is in sharp contradiction with real monetary policy. It also leads to inconsistencies. The choice of the nominal rate of interest as the argument of money demand function determines the results of some known models - should they link demand for money to the real interest rate, the results would be different. These observations lead to reconsideration of the established theoretical reasoning concerning the motifs of monetary policies. Following these considerations a new paradigm linking interest rate and the demand for money is offered. The inference is that it is the real interest rate that plays crucial role in the determination of demand for money and that this relation is quite complex.

Keywords

EN

INTEREST RATE; MONETARY POLICY; MONEY DEMAND FUNCTION

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Komitet Nauk Ekonomicznych PAN, Polskie Towarzystwo Ekonomiczne
• Journal: Ekonomista
• Year: 2006
• Issue: 2
• Pages: 145-168
• Document type: ARTICLE

Contributors

author

Koronowski A. K.

• A. K. Koronowski, Uniwersytet Warszawski, Wydzial Nauk Ekonomicznych, ul. Dluga 44/50, 00-241 Warszawa, Poland

Identifiers

CEJSH db identifier

06PLAAAA01433160