No. 78. TESTING ALTERNATIVE MONEY THEORIES: A G7 APPLICATION
Y. Panagopoulos, A. Spiliotis. 2005.
The core issue of this paper is to present the way the different schools of economic thought are approaching the money supply process, the money-income relationship (a restricted quantity theory of money approach) as well as the money multiplier model. More analytically, in the theoretical part of our paper we briefly discuss the arguments between the different post Keynesians school of thought upon these issues (Accommodatonism, Structuralism, Liquidity Preference and Circuit theory of Money) as well as the Orthodox and the New Keynesian school view.Then in the statistical part, with the help of advance econometric causality techniques, we are searching for the theory which better “fits the data” in the G7 economies. The results favor the idea that in most of the G7 economies -with the possible exemption of France and Japan- the “road” of non-orthodox money generation process (with some peculiarities for each country) seems to be followed.