Creator: Smith, Bruce D., d. 2002. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 245 Abstract:
Recent developments in monetary economics stress the nature of monetary injections, emphasizing that these have implications for the relationship between money and prices. In constrast, traditional approaches posit stable money demand functions that are independent of how money is injected. The former approach implies that certain proportionality relations between money and prices need not obtain. This permits the two approaches to be empirically distinguished, but only if an appropriate "experiment" is conducted. The colonial period is one such experiment. Colonial evidence suggests that the nature of injections is crucial to the effect on prices of changes in the money supply.
Keyword: Value of money, Sargent-Wallace theory of money, Monetary injections, and Quantity theory of money Subject (JEL): N11 - Macroeconomics and monetary economics ; Growth and fluctuations - United States ; Canada : Pre-1913 and E51 - Monetary policy, central banking, and the supply of money and credit - Money supply ; Credit ; Money multipliers