Abstract
There are some types of money market models in the history of economic theory. They are the quantity theory of money, the Keynesian approach and the Banking School theory. The object of the present article is to place Thornton in the proper position among those theories.
His theory is included in the quantity theory. It is true that he instists on the theory in his Paper Credit, but he also mentions the effect of money on the real variables in an economy. However, that is true of other quantity theorists, such as Hume and Fisher. They recognize that changes in the quantity of money affect output and employment in the short run, while emphasizing that the price level is determined only by the money supply in the long run. Therefore, Thornton is in the same camp as they.
He also belongs to the Wicksellian stream, which begins with Thornton, followed by Ricardo, Joplin and so on, and then reaches to Wicksell. According to the argument, changes in the money stock originate from a disparity between the rate of interest and the rate of profit.
