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Title: |
Transactions Demand for Money and the Inverse Relations between
Inflation and Output: The Case of Korean Economy |
| Author: |
Park, Chan Il |
| Author
Affiliation: |
Kongju U |
| Source: |
International Economic Journal, Spring 1998, v. 12, no. 1, pp. 39-51 |
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Publication Date: |
Spring 1998 |
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Abstract: |
This study develops a model of inflation
which combines the simple quantity theory with the cash-in-advance
model. The econometric results show that (a) the transactions demand for
money can explain, contrary to the Phillips curve proposition, the
negative relation between inflation and real output growth; (b) the
proposition that asset transactions may influence the transactions
demand for money independently of fluctuations in real output and
interest rate does not stand up even given an extremely active stock
market; and (c) the implication of Tsiang's cash-in-advance model that
international trade can be a separate source of the transactions demand
is not supported. Policy makers should take into account the aggregate
demand pressure in the form of nominal money supply growth in excess of
growth in money demand, rather than the nominal money supply growth
alone. |
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