Economics at your fingertips  

Deriving the new quantity equation: an approach for a closed and an open economy

Paul Welfens ()

International Economics and Economic Policy, 2016, vol. 13, issue 4, No 5, 549-561

Abstract: Abstract This theoretical contribution shows a simple way in which the quantity equation can be derived as a long-term equilibrium solution for the case of a closed economy and an open economy, respectively. It is shown first for the case of a closed economy which parameters stand behind “velocity” and that indeed there are arguments why velocity should be constant over time – assuming a specific parameter set of the goods market. It is noteworthy that the quantity equation can be derived both in a demand-side context and in a long run supply-side approach. Moreover, a new derivation is presented for the case of an open economy and it is shown that trade as well as foreign direct investment should be expected to have an influence on the price level and the inflation rate, respectively. Finally, the analysis suggests that financial market activities should have an impact on the price level. I gratefully acknowledge technical support by Murat Ismail and David Hanrahan. Moreover I appreciate discussions with Jens Perret (Schumpeter School of Business and Economics) and Thomas Gries, University of Paderborn. The usual disclaimer applies.

Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Deriving the New Quantity Equation: An Approach for a Closed and an Open Economy (2014) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10368/PS2

DOI: 10.1007/s10368-014-0298-3

Access Statistics for this article

International Economics and Economic Policy is currently edited by Paul J.J. Welfens, Holger C. Wolf, Christian Pierdzioch and Christian Richter

More articles in International Economics and Economic Policy from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2021-05-09
Handle: RePEc:kap:iecepo:v:13:y:2016:i:4:d:10.1007_s10368-014-0298-3