The approach to cash balances is in many respects superior to Fisher's approach to money theory of quantities. The approach to cash balances underlines the importance of keeping cash balances instead of providing money at a given point in time. It led to support his theory of preference for liquidity and interest rates and to include monetary value and the theory of production.
The version of the quantity theory in cash balance is superior to the transaction version as the first calculates money value in terms of demand and supply. It is therefore an entire theory. However, the value assessment of money is divorced artificially from the theory of value in the transaction approach.
The cash balance approach is better than the transaction approach because they are entirely discard the concept of the speed of money movement which 'obscures people's motivations and decisions.
Again the version of cash balances is realistic more than the version of the transactions, as it relates to the short period, the latter to the long period. " Therefore, it is unrealistic to examine the relationship between the value of the money and the price level.
Transactions concerning final commodities shall only be included in the cash balances when P refers to the final commodity level. Equation P, on the other hand, covers all kinds of transactions. The real price level is thus difficult to determine. The former equations are therefore simpler and more realistic.
The approach to cash balances is in many respects superior to Fisher's approach to money theory of quantities. The approach to cash balances underlines the importance of keeping cash balances instead of providing money at a given point in time. It led to support his theory of preference for liquidity and interest rates and to include monetary value and the theory of production.
The version of the quantity theory in cash balance is superior to the transaction version as the first calculates money value in terms of demand and supply. It is therefore an entire theory. However, the value assessment of money is divorced artificially from the theory of value in the transaction approach.
The cash balance approach is better than the transaction approach because they are entirely discard the concept of the speed of money movement which 'obscures people's motivations and decisions.
Again the version of cash balances is realistic more than the version of the transactions, as it relates to the short period, the latter to the long period. " Therefore, it is unrealistic to examine the relationship between the value of the money and the price level.
Transactions concerning final commodities shall only be included in the cash balances when P refers to the final commodity level. Equation P, on the other hand, covers all kinds of transactions. The real price level is thus difficult to determine. The former equations are therefore simpler and more realistic.