Theory of Money and Interest Rate Determination: A History of Stock and Flow Analysis

Author: Shuai Yong
Publisher:
Publish Date: 2005-01-01
Features: As a book on the history of economic thought, the author primarily introduces the monetary theories of theorists based on their original works, aiming to authentically reflect historical facts. Additionally, the author extensively references interpretations and critiques from contemporary economists. At appropriate times, the author also incorporates personal comments, hoping they are well-founded. Regarding the concepts of stock and flow, there are two distinct definitions: the "dimension" concept and the "behavior" concept. According to the research objectives of this book, they correspond to the interest rate determination theory in the first part and the monetary theory in the second part. The first part, Interest Rate Determination Theory, primarily introduces Dennis H. Robertson's monetary liquidity preference theory and John M. Keynes's liquidity preference theory. In the 1930s and 1950s, the economics community engaged in a debate between these two interest rate theories, with the former representing the flow analysis method and the latter representing the stock analysis method. The first phase of the debate focused on saving theories, while the second phase focused on the equivalence of the two analytical methods. The second part, Monetary Theory, primarily introduces the monetary thoughts of seven economists. John Hicks, James Tobin, and Milton Friedman, among others, represent the stock monetary theory, emphasizing the asset nature of money and focusing on describing financial cycles. K. Wicksell, Ralph Houthas, Dennis Robertson, and Friedrich Hayek, among others, represent the flow monetary theory, emphasizing the transactional function of money and focusing on describing industrial cycles.