Economic Quarterly

2002

 

Summer 2002

Knut Wicksell and Gustav Cassel on the Cumulative Process and the Price-Stabilizing Policy Rule

Thomas M. Humphrey

Gustav Cassel (1866-1945) deserves credit for establishing quantity-theoretic foundations for Knut Wicksell's (1851-1926) cashless-society version of the cumulative inflationary process and the price-stabilizing policy rule. Wicksell's ambiguities and inconsistencies regarding those foundations left his writings open to anti-quantity theory interpretations. Cassel showed conclusively that endogenous, loan-created changes in the stock of bank money were necessary to translate interest rate differentials into price level changes. Likewise, he showed that central bank interest rate adjustments work through money stock changes to stabilize the price level.



Contact Us

Richmond

Amanda L. Kramer
(804) 697-8606

Publications image
Get Our Free Publications

To receive a notification by email when Economic Quarterly is posted online or to order single copies of past issues, click on the links below (published online only since 2012).