IDEAS home Printed from https://ideas.repec.org/p/fri/fribow/fribow00475.html
   My bibliography  Save this paper

The meaning of monetary stability

Author

Listed:
  • Pesenti, Amos

Abstract

The conventional approach to monetary stability is not so much different from that related to price stability. As such, it simply supposes that the aggregation of prices in the marketplace is necessary and sufficient for determining the presence of inflation (or deflation) in the economy. However, investigating monetary stability according to this microeconomic approach leads to confusion since the aggregation of price data, as suggested in this paper, does not explain the source of inflationary (or deflationary) pressure on overall prices. Consequently, price instability does not necessarily imply the existence of monetary instability, and vice versa. Hence, this paper, besides presenting a new macroeconomic approach to monetary stability, explains the true source of upward (or downward) pressure on overall prices and then provides policy recommendations to prevent monetary instability.

Suggested Citation

  • Pesenti, Amos, 2016. "The meaning of monetary stability," FSES Working Papers 475, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    • Handle: RePEc:fri:fribow:fribow00475
    as

    Download full text from publisher

    File URL: http://doc.rero.ch/record/277537/files/WP_SES_475.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Michael Wickens, 2008. "The Centralized Economy, from Macroeconomic Theory: A Dynamic General Equilibrium Approach," Introductory Chapters, in: Macroeconomic Theory: A Dynamic General Equilibrium Approach, Princeton University Press.
    2. Philip Arestis & Eckhard Hein & Edwin Le Héron, 2007. "Aspects of Modern Monetary and Macroeconomic Policies," Post-Print halshs-00155170, HAL.
    3. Michael Woodford, 1998. "Doing Without Money: Controlling Inflation in a Post-Monetary World," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 173-219, January.
    4. Brian Snowdon & Howard R. Vane & Peter Wynarczyk, 1994. "A Modern Guide To Macroeconomics," Books, Edward Elgar Publishing, number 450, March.
    5. Michael Wickens, 2008. "Imperfectly Flexible Prices, from Macroeconomic Theory: A Dynamic General Equilibrium Approach," Introductory Chapters, in: Macroeconomic Theory: A Dynamic General Equilibrium Approach, Princeton University Press.
    6. Paul A. Samuelson, 1968. "What Classical and Neoclassical Monetary Theory Really was," Canadian Journal of Economics, Canadian Economics Association, vol. 1(1), pages 1-15, February.
    7. J. M. Keynes, 1937. "The General Theory of Employment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 51(2), pages 209-223.
    8. Peter N. Ireland, 1993. "Price stability under long-run monetary targeting," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 25-46.
    9. Graziani,Augusto, 2003. "The Monetary Theory of Production," Cambridge Books, Cambridge University Press, number 9780521812115, January.
    10. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-954, August.
    11. Claude Gnos, 2007. "Monetary Policy from a Circuitist Perspective," Post-Print halshs-00203521, HAL.
    12. Sergio Rossi, 2001. "Money and Inflation," Books, Edward Elgar Publishing, number 2571, March.
    13. Iwai, Katsuhito, 1996. "The bootstrap theory of money: A search-theoretic foundation of monetary economics," Structural Change and Economic Dynamics, Elsevier, vol. 7(4), pages 451-477, December.
    14. Philip Arestis & Eckhard Hein & Edwin Le Heron (ed.), 2007. "Aspects of Modern Monetary and Macroeconomic Policies," Conference proceedings of the Research Network Macroeconomics and Macroeconomic Policies (FMM), IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute, number 9b-2007, December.
    15. Louis-Philippe Rochon & Sergio Rossi (ed.), 2015. "The Encyclopedia of Central Banking," Books, Edward Elgar Publishing, number 15438, March.
    16. G. C. Archibald & R. G. Lipsey, 1958. "Monetary and Value Theory: A Critique of Lange and Patinkin," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 26(1), pages 1-22.
    17. Frederic S. Mishkin, 2009. "Monetary Policy Strategy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262513374, December.
    18. Graziani,Augusto, 2009. "The Monetary Theory of Production," Cambridge Books, Cambridge University Press, number 9780521104173, January.
    19. Alvaro Cencini & Sergio Rossi, 2015. "Economic and Financial Crises," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-46190-2.
    20. Mathías Vernengo, 2007. "Money and Inflation," Chapters, in: Philip Arestis & Malcolm Sawyer (ed.), A Handbook of Alternative Monetary Economics, chapter 28, Edward Elgar Publishing.
    21. Olivier Blanchard, 2009. "The State of Macro," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 209-228, May.
    22. Claude Gnos & Sergio Rossi (ed.), 2012. "Modern Monetary Macroeconomics," Books, Edward Elgar Publishing, number 12557, March.
    23. Michael Wickens, 2008. "Asset Pricing and Macroeconomics, from Macroeconomic Theory: A Dynamic General Equilibrium Approach," Introductory Chapters, in: Macroeconomic Theory: A Dynamic General Equilibrium Approach, Princeton University Press.
    24. Alvaro Cencini & Claude Gnos & Sergio Rossi, 2016. "Quantum macroeconomics: A tribute to Bernard Schmitt," Cuadernos de Economía - Spanish Journal of Economics and Finance, Asociación Cuadernos de Economía, vol. 39(110), pages 65-75, Mayo.
    25. Louis-Philippe Rochon & Sergio Rossi (ed.), 2003. "Modern Theories of Money," Books, Edward Elgar Publishing, number 2506, March.
    26. Jean-François Ponsot & Sergio Rossi, 2009. "The political economy of monetary circuits : tradition and change in post-keynesian economics," Post-Print halshs-00482625, HAL.
    27. Ross M. Starr, 2012. "Why is there Money?," Books, Edward Elgar Publishing, number 13763, March.
    28. Philip Arestis (ed.), 1993. "Money and Banking," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-13319-2.
    29. Philip Arestis & Eckhard Hein & Edwin Heron (ed.), 2007. "Aspects of Modern Monetary and Macroeconomic Policies," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-62734-5.
    30. Louis-Philippe Rochon & Sergio Rossi (ed.), 2016. "An Introduction to Macroeconomics," Books, Edward Elgar Publishing, number 15523, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Claude Gnos, 2012. "The unemployment issue," Chapters, in: Claude Gnos & Sergio Rossi (ed.), Modern Monetary Macroeconomics, chapter 6, pages 166-192, Edward Elgar Publishing.
    2. Eckhard Hein, 2017. "Post-Keynesian macroeconomics since the mid 1990s: main developments," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(2), pages 131-172, September.
    3. Pesenti, Amos, 2015. "The origin of inflation in a domestic bank-based payment system," FSES Working Papers 457, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    4. Edoardo Gaffeo & Mauro Gallegati & Umberto Gostoli, 2015. "An agent-based “proof of principle” for Walrasian macroeconomic theory," Computational and Mathematical Organization Theory, Springer, vol. 21(2), pages 150-183, June.
    5. Aimola, Akingbade U & Odhiambo, Nicholas M, 2021. "Public debt and inflation: Empirical evidence from Ghana," Working Papers 27063, University of South Africa, Department of Economics.
    6. Godwin Essang Esu,(PhD), 2023. "Fiscal Imbalances, Economic Growth and Macroeconomic Stability in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(8), pages 887-901, August.
    7. Sarah Godar & Christoph Paetz & Achim Truger, 2015. "The scope for progressive tax reform in the OECD countries. A macroeconomic perspective with a case study for Germany," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 79-117.
    8. Akingbade U. Aimola & Nicholas M. Odhiambo, "undated". "Public Debt and Inflation: Empirical Evidence from Ghana," Working Papers AESRIWP06, African Economic and Social Research Institute (AESRI).
    9. Alvaro Cencini, 2012. "Towards a macroeconomic approach to macroeconomics," Chapters, in: Claude Gnos & Sergio Rossi (ed.), Modern Monetary Macroeconomics, chapter 2, pages 39-68, Edward Elgar Publishing.
    10. Angel Asensio, 2009. "Between the cup and the lip," Working Papers halshs-00496911, HAL.
    11. Eckhard Hein & Daniel Detzer, 2015. "Finance-Dominated Capitalism and Income Distribution: A Kaleckian Perspective on the Case of Germany," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 1(2), pages 171-191, July.
    12. Jesper Jespersen, 2012. "Keynes’s General Theory after 75 years: time to re-read and reflect," Chapters, in: Jesper Jespersen & Mogens Ove Madsen (ed.), Keynes’s General Theory for Today, chapter 8, pages 131-150, Edward Elgar Publishing.
    13. DJINKPO, Medard, 2019. "A DSGE model for Fiscal Policy Analysis in The Gambia," MPRA Paper 97874, University Library of Munich, Germany, revised 30 Dec 2019.
    14. Pedro Garcia Duarte, 2015. "From real business cycle and new Keynesian to DSGE Macroeconomics: facts and models in the emergence of a consensus," Working Papers, Department of Economics 2015_05, University of São Paulo (FEA-USP).
    15. Louis-Philippe Rochon & Sergio Rossi, 2013. "Endogenous money: the evolutionary versus revolutionary views," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(2), pages 210-229, January.
    16. repec:ilo:ilowps:484519 is not listed on IDEAS
    17. Olkhov, Victor, 2023. "Economic Theory as Successive Approximations of Statistical Moments," MPRA Paper 118722, University Library of Munich, Germany.
    18. Eckhard Hein & Achim Truger, 2012. "Finance-dominated capitalism in crisis—the case for a global Keynesian New Deal," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 35(2), pages 187-213.
    19. Angel Asensio, 2009. "Between the cup and the lip," CEPN Working Papers halshs-00496911, HAL.
    20. Shafik Hebous, 2011. "The Effects Of Discretionary Fiscal Policy On Macroeconomic Aggregates: A Reappraisal," Journal of Economic Surveys, Wiley Blackwell, vol. 25(4), pages 674-707, September.
    21. Matthew Canzoneri & Robert Cumby, 2008. "Macroeconomic Implications of a Key Currency," CDMA Conference Paper Series 0807, Centre for Dynamic Macroeconomic Analysis.

    More about this item

    Keywords

    banking; consumer price index; deflation; inflation; monetary stability; money; payments; price stability;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fri:fribow:fribow00475. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mustapha Obbad (email available below). General contact details of provider: https://edirc.repec.org/data/wsffrch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.