Quantitative tightening and Quantity theory of money: Difference between pages

Revision as of 14:20, 23 October 2012

Economics. A theory formalised by Irving Fisher, which links the level of prices with the amount of money in circulation.

It is defined as: P = MV/T, where P = price level, M = amount of money in circulation, V = velocity of circulation and T = volume of transactions.

Monetarists believe that it is the amount of money in circulation which has the biggest effect on price levels and inflation rates.

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-''Monetary policy.''
+''Economics''.
+A theory formalised by Irving Fisher, which links the level of prices with the amount of money in circulation.
-In relation to monetary policy, 'quantitative tightening' involves a central bank reducing its holdings of financial assets, and its effect is to decrease the money supply.
+It is defined as: P = MV/T, where P = price level, M = amount of money in circulation, V = velocity of circulation and T = volume of transactions.
-Quantitative tightening is also known as (central bank) balance sheet reduction.
-It is the reverse process of quantitative easing.
+Monetarists believe that it is the amount of money in circulation which has the biggest effect on price levels and inflation rates.
 == See also ==
-* [[Balance sheet reduction policy]]
+* [[Fisher's equation]]
-* [[Central bank]]
-* [[Fiscal policy]]
-* [[Helicopter money]]
-* [[Monetary policy]]
-* [[Money supply]]
-* [[Quantitative easing]]
-[[Category:The_business_context]]
-[[Category:Financial_products_and_markets]]