CFDP 605

Asset Markets, General Equilibrium and the Neutrality of Money


Publication Date: September 1981

Pages: 22


When government liabilities (including money) are held in private portfolios only as stores of value, and do not provide additional benefits (as liquidity services), the real variables in an economy with uncertainty are not affected by the government’s trading in assets. There are also policies which alter the money supply through taxes or subsidies, and affect the price of money without changing real variables.

See CFP: 586