Essays in Monetary Economics (Collected Works of Harry Johnson)

CHAPTER V

NOTES ON THE THEORY OF TRANSACTIONS DEMAND FOR CASH*

I.  INTRODUCTION

One of the great contributions to the advancement of monetary theory made by Keynes in his General Theory of Employment, Interest and Money was his attempt to replace the mechanical treatment of velocity as a technological and institutional constant, characteristic of the ‘classical’ theory he attacked, by a theory of demand for money as an asset alternative to other interest-bearing but less liquid assets. Keynes’s own theory of demand for money, however, was an awkward compromise between the preceding treatment of velocity as a constant, and a fully generalized asset ...