Monetary Theory: The Legacy of Economist Marco Fano

Monetary Theory: The Legacy of Economist Marco Fano

economic analysis of marco fano A long period between 1900 (the year in which he published his first essay “Industrial and Agricultural Protectionism” in Turin, Bocca) and 1964 (the year in which he published “Constantino Bresciani-Turoni in Memoriam” in the Weltwirtschaftliches Archive) expanded to. 92 p. 233–237). Throughout his career, he has primarily focused on various economic topics, including theory of money and bankingWith a particular focus on economic growth, population, savings, and technological progress, as well as economic fluctuations, international trade, and abnormal capital transfers.

monetary theory

In the early 20th century, the neoclassical theory of money and debt was widely shared by most economists. According to this theory, commodity money used as a medium of exchange did not have a significant impact on the functioning of the capitalist economic system and was considered “neutral”. There amount of money in circulation It was seen as an external given, and the banking system was merely an intermediary between the supply and demand for savings. Credit was considered a function of bank reserves, and the interest rate was adjusted to balance this credit supply and demand: these were key concepts of the quantity theory of money proposed by Irving Fisher.

However, Marco Fano did not fully agree with fisher’s quantity theory, Instead, he turned to the monetary theory of Swedish economist Knut Wickell. According to Wicksell, the monetary circuit was not neutral and had an intrinsic role as an endogenous quantity, determined by the level of aggregate demand in the economy. Marco Fano underscored the importance of the relationship between the natural interest rate and the monetary interest rate in determining the demand for credit.

Another difference between Fano and Wixel relates to the money supply. Marco Fano believed that the banking system could not be enjoyed unlimited credit capacity, Contrary to Wixel’s approach.

Despite his original approach to monetary theory, Marco Fanno was still part of the vein of neoclassical economists. Furthermore, his view of the need for a single issuing bank paralleled that of Ludwig von Mises and Friedrich von Hayek, economists who presented their analysis in those years.

wealth growth and cycles

Marco Fano’s theory of money goes beyond simply interpreting price movements and also focuses on economic progress. His analysis focuses on the relationship between wealth and accumulation, examining how debt finances entrepreneurs and how income is shared between wages and profits to generate the savings needed to finance investment. .

Fano believes that effective economic growth depends primarily on global investment by businesses, which he considers a “core” element along with population growth. propensity to save and technological innovation. In this sense, the role of innovation in economic development is fundamental, and this aspect brings it closer to the views expressed by economists such as Keynes and Schumpeter.

Fano’s theory has many points of contact with Keynes and Schumpeter. For example, his theory of economic fluctuationsThe relationship between savings and investment and the importance given to innovation as an engine of economic growth are themes shared by these great economists.

international capital movement

Marco Fanno’s analysis of international capital movements, as explained in his 1935 work “Abnormal Capital Transfers and Crises”, has shown considerable relevance and relevance over time. His ideas continue to be applied in the context of stabilization and development policies of emerging countries and in problems arising after the liberalization of capital movements within the European Community. 1957 Treaty of Rome.

According to Fanno, capital transfers can be classified as “normal” and “abnormal”. Simple transfers are those that depend on net interest rates prevailing in different countries and are part of regular financial flows. However, abnormal transfers are those that result from extraordinary circumstances, such as war loan payments, iethe introduction or increase of taxes on capital, Political instability or lack of confidence in the banking system or national currency. These unusual capital movements are not affected by the amount of voluntary savings available, but create a sudden and significant outflow of previously accumulated or invested savings, creating a capital “stock” that rapidly leaves the country.

The role of exchange rate expectations is important in this set coin value Affected by abnormal transfer of capital. If traders believe that there will be no further devaluation in the exchange rate, then the currency will stabilize. However, if mistrust persists, capital flight will continue to harm the national economy.