The Traderszone Network

Published in TZ Latest News 13 August, 2015 by The TZ Newswire Staff

Endogenous money and the QTM (#4)

In the first three posts of the series I sketched out a simple model of inflation and NGDP growth.  For large persistent changes in the money supply, M dominates everything else.  But inflation reflects both money growth and changes in the real demand for money.  So real GDP growth raises real money demand, and hence is deflationary, while higher nominal interest rates reduce real money demand, and hence are inflationary.

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