Towards a loanable funds/amended-liquidity preference theory of the exchange rate and interest rate

Article Abstract:

A unified theory of the exchange rate and interest rate is formulated to create a perspective that would explain the many baffling facts have arisen in the international economy following the Bretton Woods Agreement in 1944. With the use of the loanable funds/amended-liquidity preference technique, it was found that monetary expansion can push up interest rate initially but depreciate the local currency, interest rates and exchange rates can escalate because of real demand shocks and exchange rate overshooting will not occur due to an infinite interest elasticity for capital movements under an 'extended Marshall-Lerner' condition.

Research, Economic aspects, Prices and rates, Foreign exchange, Foreign exchange rates, Interest rates, International economic relations, Bretton Woods Conference, 1944

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Long-run money demand and inflation in China

Article Abstract:

A study, which analyzed the long-run money demand functions of China, showed the feasibility of controlling inflation under 10%. The study also showed that when the monetary target is M2 (currency in circulation plus savings deposits), the growth rate should not exceed 28%-29% a year while an M0 (currency in circulation only) monetary target will require a growth rate not exceeding 24%-25% a year. The data for monetary aggregates were taken from China's statistical yearbook from 1951-1991.

Economics, Research and Development in the Social Sciences and Humanities, National Income & Expenditure, China, Analysis, Economic policy, Inflation (Finance), Currency devaluation, Devaluation (Currency), Money demand, Inflation (Economics)

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