Banks and the quantity theory: Wicksell and Fisher

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Chapter 2 in Banks and Finance in Modern Macroeconomics, 2019, pp 24-41 from Edward Elgar Publishing

Abstract: At the opening of the 20th century, two problems concerned economists most: a more satisfactory theory of the general price level; and a satisfactory explanation of monetary instability and economic fluctuations. The chapter looks at Wicksell’s and Fisher’s attempts to develop a satisfactory quantity theory of money by taking account of the role of banks, which are at the core of their analyses. Wicksell was mostly concerned with developing the quantity theory by explicitly including bank deposits and the expansion of deposits through credit. Fisher, too, dealt with the general price level considering banks, but he was more interested in economic fluctuations than Wicksell. He dealt with the transition periods after a monetary shock and credit cycles, underlining the role of banks in the phenomena of monetary instability and fluctuations. Credit relations are crucial in Fisher’s explanation of prosperity and depression.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2019
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