Research Discussion Paper – RDP 7704 Money and Money-income: An Essay on the ‘Transmission Mechanism’


This paper is a substantially revised version of an essay originally circulated as University of Western Ontario, Economics Department Research Report 7703. It is to be delivered at the 48th Congress of the Australian and New Zealand Association for the Advancement of Science held in Melbourne August 29–September 2 1977, and will be published in the Journal of Monetary Economics.

Its subject matter is the nature of the linkages that lie between variations in the quantity of money and the level of money income. Although it seeks to provide a general survey of the literature on this subject, particularly that which has been published since about 1970, it lays particular stress on the nature of these linkages in open economies and upon the approach which analyses the transmission mechanism as a disequilibrium process. Thus it naturally draws upon work in this area previously carried out at the Reserve Bank of Australia, and published in earlier papers in this series.

I am grateful both to the Reserve Bank of Australia and to the Canada Council for supporting the research which led to this paper, and to Karl Brunner, Eddie Clarke, Edgar Feige, Malcolm Fisher, Peter Howitt, Peter Jonson, Allan Meltzer, Michael Parkin and Richard Snape for helpful comments on earlier drafts. Needless to say, the contents of this version are entirely my own responsibility. In particular the analysis and conclusions are not necessarily those of the Reserve Bank of Australia.