The two demands: Why a demand for non-consumable money is different from a demand for consumable goods

Dmitry Levando ()
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Dmitry Levando: National Research University, Moscow, Russia

No 2020:05, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: The paper explicitly discusses the key differences between a demand for consumables and demand for (non-consumable) credit money; why this matters. For example, in contrast to consumables, money can not be demanded by only one agent; it is a stock variable; credit requires special arrangements to implement trust now to clear up a debt later; for a finite time period there is zero demand for non-consumable money (Hahn paradox). These issues are important for developing micro-foundations of monetary macroeconomics, including those for a liquidity trap and credit crunches, not well investigated in existing literature. Contemporary economic theory already has some answers, initiated by works of Martin Shubik. These micro-foundations are vitally important for understanding the 2020 credit crisis, and the concept of a credit cycle as a long-run interaction between real and financial sectors of economic systems.

Keywords: Demand for goods; demand for money; Martin Shubik; micro-foundations of macroeconomics; monetary economics; liquidity trap (search for similar items in EconPapers)
JEL-codes: D11 E40 E41 E49 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2020
New Economics Papers: this item is included in nep-mac and nep-mon
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