Pushkinskaya st. 43. office 10
Rostov-on-Don, Russia
e-mail: info@hjournal.ru 
tel. +7(863) 269-88-14

cubsEN (2)

On the Basic Preconditions of Non-Neutrality of Money in Economic Theory

On the Basic Preconditions of Non-Neutrality of Money in Economic Theory

Journal of Institutional Studies, , Vol. 13 (no. 1),

Based on the experimental calculations carried out with the help of the shifting mode reproduction model, as well as on the theoretical studies of Marx, Schumpeter, Keynes and his followers - representatives of the post-Keynesian direction, two conclusions were made in the article. First, that non-neutrality of money takes place in both short- and long-term periods, and second, that each of these periods has its own basic preconditions for non-neutrality. For the short term, it is a "phenomenon of nominal rigidity", and for the long term, it is a "phenomenon of capitalization of money". The thesis is justified that the "phenomenon of nominal rigidity" manifests itself mainly within the framework of the existing production, when the economic growth caused by the increase in money supply is achieved by increasing capacity utilization and engagement of idle labor. Accordingly, the "phenomenon of capitalization of money" manifests itself through the conversion of issued money into investments in fixed capital and, through the growth of this capital (and capacities), affects the GDP growth. It is shown that behind the two considered basic prerequisites there are fundamentally different theoretical approaches. Behind the short-term "phenomenon of nominal rigidity" there is an orthodox vision of economy focused on the equilibrium pricing mechanism. Behind the long-term "phenomenon of capitalization of money" there is a heterodox vision related to the mechanism of money circulation, emission and economic growth caused by it. It has been concluded that in case of probable increase of competition between these theoretical approaches it is unacceptable if short-term basic preconditions of non-neutrality of money are used in the analysis of long-term processes and long-term preconditions are used in the analysis of short-term growth cases.

Keywords: basic preconditions; phenomenon of nominal rigidity; phenomenon of capitalization of money; model of shifting mode of reproduction; orthodoxy; heterodoxy; economic growth

  • Bank of Russia (2019). Monetary policy guidelines for 2020–2022. Moscow. (In Russian).
  • Berg, L.S. (1993). Genetics and Evolution. Selected works. Novosibirsk: Nauka. (In Russian).
  • Blaug, M. (1994). Economic thought in retrospect. Moscow: Delo. (In Russian).
  • Boucekkine, R., Licandro, O., Puch, L., del Rio, F. (2005). Vintage capital and the dynamics of the AK model // Journal of Economic Theory, 120, 39–72.
  • Cover, J.P. (1992). Asymmetric Effects of Positive and Negative Money-Supply Shocks. Quarterly Journal of Economics, 107(4), 1261–1282.
  • Davidson, Р. (2006). Post Keynesian School in Macroeconomic Theory. Voprosy Ekonomiki, 8, 82–101 (In Russian).
  • Dobrynskaya, V.V. (2008). Asymmetric price rigidity and the optimal interest rate defense of the exchange rate: some evidence for the US. Journal of Policy Modeling. October, 30(5), 713–724.
  • Dornbusch, R., Fischer, S. (1997). Macroeconomics, M.: Moscow State University Publishing House, INFRA-M, – 784 p. (In Russian).
  • Ershov, M.V. (2020). FRS has fewer and fewer effective tools left // Vedomosti. 12-08-2020. (https://www.vedomosti.ru/opinion/articles/2020/08/11/836428-frs-ostaetsya – Access Date: 11.10.2020)
  • Friedman, М. (1970). The Counter-Revolution in Monetary Theory. London: Institute of Economic Affairs.
  • Howells, P., Biefang-Frisancho Mariscal, I. (2011). Recent Developments in Monetary Policy // Centre for Global Finance, Bristol Business School, University of the West of England / Working Paper Series (ISSN 2041-1596), 1.
  • Humphrey, T.M. (1991). Nonneutrality of Money in Classical Monetary Thought / Federal Reserve Bank Richmond / Economic Review, March-April, 3–15.
  • Keynes, J.M. (1978). General theory of employment, interest and money. M.: Progress, – 494 р. (In Russian).
  • Kirdina-Chandler, S.G., Maevsky, V.I. (2020). Mesoeconomics from the heterodox perspective and its structure // Journal of Institutional Studies, 12(2), 006–024.
  • Keen, S. (2014). Endogenous money and effective demand // Review of Keynesian Economics, 2(3), 271–291.
  • Maevsky, V. (2010). Reproduction of Fixed Capital and Economic Theory // Voprosy Ekonomiki, 3, 65–85. (In Russian).
  • Maevsky, V.I., Malkov, S.Yu., Rubinstein, A.A. (2015). Features and problems of modeling the shifting mode of reproduction // Journal “Economics and Mathematical Methods”, 51(1), 26–44 (In Russian).
  • Maevsky, V.I., Malkov, S.Yu., Rubinstein, A.A. (2016а). New theory of capital reproduction: development and practical application. M.; St. Petersburg: Nestor-History, 260 р.
  • Maevsky, V.I., Malkov, S.Yu., Rubinstein, A.A. (2016). A Theory of Overlapping Generations of Fixed Capital // Herald of the Russian Academy of Sciences, 86(1), 39–47.
  • Maevsky, V.I., Malkov, S.Yu., Rubinstein, A.A. (2019а). Analysis of the relationship between issuing money, inflation and economic growth with the help of the SMR-model. Voprosy Ekonomiki, 8, 45–66. (In Russian).
  • Maevsky, V.I., Malkov, S.Yu., Rubinstein, A.A., Krasilnikova, E.V. (2019б). On one direction of development of the mesoeconomics. Journal of Institutional Studies, 11(3), 21–38. (In Russian).
  • Marx, K. (2011). Capital: A Critique of Political Economy. V. 1. M.: Eksmo, 1200 р. (In Russian).
  • Moiseev, S.R. (2018). Monetarism’s „renaissance“: How the well-known theory lived in 2000–2018. Voprosy Ekonomiki, 1, 26–44 (In Russian).
  • Nelson, R.R., Winter, S.G. (2002) An Evolutionary Theory of Economic Change. M.: Delo, 536 pp. (In Russian).
  • Papademos, L., Modigliani, F. (1990). “The Supply of Money and the Control of Nominal Income.” Chapter 10 of Benjamin Friedman and Frank Hahn, eds., Handbook of Monetary Economics 1, New York: North-Holland.
  • Polbin, A.B. (2013). Building a dynamic stochastic model of overall balance for economy with high dependence on oil export, Ekonomicheskii zhurnal VShE, 2, 323–359 (In Russian).
  • Portnoy, M.A. (2019). Why Trump Doesn’t Care About Big Public Debt // USA & Canada: economics, politics, culture, 49(7), 5–19.
  • Romer, D. (2015). Higher Macroeconomics. Moscow: Publishing House of the Higher School of Economics. (In Russian).
  • Rubinstein, A.A. (2020). Expanded version of shifting mode reproduction model with endogenous inflation // Journal “Economics and Mathematical Methods”, 56(4), 26–44 (In Russian).
  • Schumpeter, J. (1982). Theory of Economic Development. M.: Progress, – 456 p. (In Russian).
  • Schumpeter, J. (2001). History of Economic Analysis. St. Petersburg: Institute “Economic School. Saint-Petersburg University of Economics and Finance. Higher School of Economics”, 3, 678 р. (In Russian).
  • Stiglitz, J.E. (2017). Where modern macroeconomics went wrong // NBER Working Paper 23795. (http://www.nber.org/papers/w23795 – Обращение 17.09.2020).
  • Tang, M.M.J. (2016). A review of the literature on monetary neutrality. MPRA Paper, No. 70113. (https://mpra.ub.uni-muenchen.de/70113/)
  • Timofeeva, T. (2010). Analysis of cash flows of the enterprise: training manual. M.: Finance and Statistics, 368 р. (In Russian).
Publisher: Ltd. "Humanitarian perspectives"
Founder: Ltd. "Humanitarian perspectives"
Online-ISSN: 2412-6039
ISSN: 2076-6297