Abstract
The present chapter combines the circular flow approach to money (featured in the last chapter) with the stock approach. In the circular flow approach, money is a device allowing transactions between agents to take place and illustrates Keynes’s famous ‘transactions’ motive for holding money. In the stock approach, money is seen as a financial asset which agents hold for investment purposes, or more precisely, as a placement as French scholars and Joan Robinson (1956: 8) say. The quantity of money held depends, in particular, on the rate of interest that can be obtained on other assets — an approach associated with Keynes’s ‘speculative’ and ‘precautionary’ motives. Agents make a portfolio choice between money and other possible financial assets. For this reason, the model developed in Chapter 4 is called Model PC, for portfolio choice.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Author information
Authors and Affiliations
Copyright information
© 2012 Wynne Godley and Marc Lavoie
About this chapter
Cite this chapter
Godley, W., Lavoie, M. (2012). Government Money with Portfolio Choice. In: Monetary Economics. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-137-08599-3_4
Download citation
DOI: https://doi.org/10.1007/978-1-137-08599-3_4
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-0-230-30184-9
Online ISBN: 978-1-137-08599-3
eBook Packages: Palgrave History CollectionHistory (R0)