The three theories of money demand are as follows:
1, the quantitative theory of traditional money.
Number of cash transactions on (1).
At the beginning of 20th century, irving fisher put forward the trading equation: MV=PY. Fisher believes that the velocity of money circulation can be regarded as a constant. Real national income has also remained unchanged. Therefore, the change of money supply will be fully reflected in the change of price. The variation of Ms= 1/v*PY is a money demand function derived from the traditional money quantity theory. It can be seen that money demand depends on nominal national income.
(2) Cash balance theory.
Cambridge School attaches great importance to the behavior of micro-subjects when studying the problem of money demand. The Cambridge School believes that, other things being equal, there is always a relatively stable proportional relationship between the demand for nominal money and everyone's nominal income level, as well as the whole economic system. The Cambridge equation is: Ms=kPY. K is the proportional coefficient, which represents the proportion of nominal national income that people are willing to hold in the form of money.
2. Keynes's theory of money demand.
(1) Money demand motivation.
Keynes's research on the theory of money demand starts with people's motivation to hold money. He divided people's motives for holding money into trading motives, preventive motives and speculative motives.
The monetary demand generated by trading motivation and preventive motivation is a function of income, while the monetary demand generated by speculative motivation is a function of interest rate. Trading motivation refers to people's convenient trading needs for daily transactions. This kind of expenditure is obviously affected by income level. Taking an individual as an example, the higher his income, the higher his monthly fixed expenditure. Therefore, it can be concluded that the monetary demand under the transaction motivation is an increasing function of income level, which is also called precautionary motivation, which means that people need to keep some money for unexpected payments. ?
(2) The development of Keynesian money demand.
Baumol-Tobin model (? The square root law is the development of Keynes's theory of money demand for trading motivation. The core idea of baumol-Tobin model is to minimize the cost of holding money (lost interest rate income, the cost of going to the bank). It describes the individual's demand for monetary assets, which is dependent on expenditure and negatively on interest rates. The "square root formula" shows that the transaction demand of money is directly proportional to income and inversely proportional to interest rate.
3. Friedman's theory of money demand.
Friedman believes that people choose money among many assets, just like choosing among many commodities. Therefore, the analysis of people's money demand can be carried out with the help of consumers' imitation and extensive choice theory. The amount of money people hold is affected by the following factors:
(1) Total wealth.
(2) the division of wealth between human and non-human forms.
(3) The expected rate of return on holding currency.
(4) the expected rate of return of other assets, that is, the opportunity cost of holding money.
(5) The utility of holding money is bright.