While Francis attributed inflation directly to excessive growth of the money stock, other policymakers blamed labor and product market failures, fiscal policy, and commodity price shocks.
Economists and policymakers generally agree that persistent changes in the price level (inflation and deflation) are, in the long run, caused by growth of the money stock in excess of the growth of total output.
First, the recovery was driven by increases in the stock of money: "the broad movements in the stock of money correspond[ed] with those in income" (1963, 497), and "the rapid rate of rise in the money stock
certainly promoted and facilitated the concurrent economic expansion" (1963, 544).
As we do for the analysis of the Markov-perfect policy, we are looking for a fix point in the optimal nominal price, [P.sub.0t], conditional on the past and future nominal prices, [P.sub.0,t-1] and [P.sub.0,t+1], and the nominal money stocks
, [M.sub.t] and [M.sub.t+1].
The monetarists claim that changes in money stocks
cause changes in price levels.
In the definitive edition of the Elements, the sum in terms of numeraire of the current demands for the services of all real circulating capital in the form of money (Walras's italics) is equilibrium-identical to the numeraire value of the initial money stock
, using the measurement properties of the latter commodity [Walras, 1954, p.
To this end, the Bank regards it as appropriate for the money stock
M3 to expand by 4 percent to 6 percent between the fourth quarter of 1994 and the fourth quarter of 1995 ....
Do CPEs tend to have excessive money stocks
? One can and should answer this question straight forwardly.
The only aggregates left to consider are the narrowly and broadly defined money stocks
. There is a weak theoretical case favoring the narrow definition because time deposits must be transferred into demand deposits or currency before they can be spent.
Achieving these price falls, however, required contractions of the money stock
and so the level of aggregate nominal spending.
Real interest rates soared (see Figure 10), and both the nominal and real money stocks
collapsed (see Figures 11 and 12).
It relates more particularly to regulation by the Central Bank of the money stock
, its primary objective being to guarantee monetary stability.