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e. The ECB continues to determine the short-term policy interest rate by
offering to buy or sell government debt when the rate rises above or falls
below the desired rate.

NOTES
1. To facilitate subsequent discussion, it is important to note that this arrangement does not
require any stock of gold to be held by the mint. All the gold bullion required to be converted
to coin is supplied by the buyer of coin, and all the coin to be converted to gold is supplied by
the buyer of bullion. The mint need hold no net stocks of either bullion or coin.
2. In the General Theory Keynes identified these characteristics as a low or negligible elasticity
of production and substitution.
3. It is a seller in the sense that it provides government services against the tax liabilities.
4. Keynes's original definition was related to the operation of prices in the labour market (if real
consumption wages fell, then it would be expected that demand for labour would rise, but if labour
supply was also greater, going opposite the supposed negative relation between labour supply
and real wages, then unemployment need not fall. Thus, if both demand and supply increase,
the fall in the real wage does not bring the market any closer to equilibrium).
5. In a much more transparent and efficient way than by defining full employment as that rate of
unemployment that produces price stability.
6. More detailed descriptions of how the scheme might operate are found in Mosler ( 1997-8) and
Wray ( 1998) .

REFERENCES

Bank for International Settlements (BIS) ( 1997) Annual Report for 1996, Basle, June.

Graham, B. ( 1937) Storage and Stability, New York: McGraw-Hill.

Hart, A. G., Kaldor N. and Tinbergen, J. ( 1964) "The Case for an International Commodity
Reserve Currency", Geneva, UNCTAD, March-June.

Hicks, J. ( 1985) "Keynes and the World Economy", in F. Vicarelli (ed.), Keynes's
Relevance Today, London: Macmillan.

Keynes, J.M. ( 1936) The General Theory of Employment, Interest and Money, London:
Macmillan.

Mosler, W. ( 1997-8) "Full Employment and Price Stability", Journal of Post Keynesian
Economics, Winter, 167-82.

Wray, L.R. ( 1998) Understanding Modern Money, Cheltenham: Edward Elgar.

-194-

Questia, a part of Gale, Cengage Learning. www.questia.com

Publication Information: Book Title: Full Employment and Price Stability in a Global Economy. Contributors: Paul Davidson - editor, Jan Kregel - editor. Publisher: Edward Elgar. Place of Publication: Cheltenham, England. Publication Year: 1999. Page Number: 194.
    
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