Money and real economic disparities between nations and between regions

Dow, Sheila C (1981) Money and real economic disparities between nations and between regions. PhD thesis, University of Glasgow.

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The hypothesis investigated is that, where real economic disparities exist between regions or nations, money and financial institutions may on balance tend to increase those disparities (the public sector being a major counteractive force). Part I lays the groundwork for the development of a theory which supports the hypothesis. Chapter 1 outlines the existing theoretical treatment of money and the distribution of income. The question has been addressed from a variety of standpoints, often indicating support for the hypothesis to some degree, but there is no systematic treatment of the role of money in the context of persisting real disparities in both the regional and international contexts. A strong sense of the real distributional implications of particular financial arrangements, however, emerges from policy discussions in both the regional and international contexts, surveyed in Chapter 2. In order to build up a general theory of money and distribution on the basis of these various strands of theory and policy, it is necessary to adopt some view of the relationship between money and expenditure on the one hand, and of the development process on the other. The discussion of the monetarist view of money, in Chapter 3, suggests that such an approach would not lend support to the hypothesis, money being viewed essentially as neutral. In contrast, the Keynesian view, also outlined in this chapter, is that money essentially is non-neutral. While this approach is more promising in terms of a basis for the theory to be constructed, the monetarist treatment of the balance of payments is to be borne in mind as highlighting the financial interrelationships between economies. Without attempting to explain underlying real disparities, Chapter 4 outlines three principles guiding the view to be taken of the development process. First, it is suggested that growth rate disparities should not be viewed as being continually eliminated by some convergence process, although the balance of forces is such that they should not be viewed as implying divergence, either. Second, it is suggested that very similar forces underly regional disparities and international disparities, warranting the development of a general theory referring to both. Third, the importance of the interdependence of economies is emphasised. In Part II, a theory of the demand for money is developed to apply to a range of economies, in Chapter 5, then a theory of money supply in Chapter 6. Finally, Chapter 7 concludes with a multiplier model which combines the money multiplier process and the income supermultiplier, to illustrate the way in which income adjustment may be induced. Part III is devoted primarily to assessing the theory outlined in earlier chapters against the evidence. The theory built up in Chapters 5-7 rested on a particular view of money in the temporal framework, which was set out in Chapter 3. The temporal evidence for the theory of demand for and supply of money in an economy, in the long-run and in the short-run, is taken from the experience of the U.S. and the U.K., and set out in Chapter 8. Chapters 9 and 10 then assess the application of this theory in a spatial framework. First, the regional evidence is discussed for Canada and the U.S. Then international evidence is given in Chapter 10 for groups of countries (low-income developing countries, middle-income developing countries, the capital-surplus oil exporters, and the industrialised countries). While there is the problem of identifying demand and supply curves, the evidence is overall consistent with relatively high liquidity preference in lower-income economies and relatively low supply of liquidity (offset somewhat by public sector flows of funds). Chapter 11 summarises the conclusions reached in earlier chapters, and then proceeds to suggest some further policy conclusions. In particular, it is suggested that transfers of funds (within and between nations) are likely to have real distributional effects which differ from the nominal amounts involved. Further, the implications for the distribution of income should be taken into account when policies promoting capital mobility are proposed. In general, however, the main conclusion reached is that the role of money and financial institutions should be taken into account in any theoretical framework which adequately describes economic disparities between regions and nations. (Abstract shortened by ProQuest.).

Item Type: Thesis (PhD)
Qualification Level: Doctoral
Additional Information: Adviser: Thomas Wilson
Keywords: Economics
Date of Award: 1981
Depositing User: Enlighten Team
Unique ID: glathesis:1981-73724
Copyright: Copyright of this thesis is held by the author.
Date Deposited: 14 Jun 2019 08:56
Last Modified: 14 Jun 2019 08:56

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