1. We propose a theoretical model from which we can derive Monetarist's following two main assertions; a) If the government tries to lower the rate of unemployment below the natural rate, there must occurs hyper-inflation, b) If the government confines himself to keep the rate of increase of money constant, the rate of unemployment converges to the natural rate.
2. The model have the following three assumptions; α) the private investment demand is highly sensitive to the interest rate and insensitive to the expected rate of profit, β) the rate of change of money wage rate is governed by the expected inflation rate as well as the situation of labor market, γ) the income velocity of money is not so sensitive to the change in the interest rate and expected inflation rate.
3. Among the above three, the assumption of investment demand α) is most important. If the private investment demand is highly sensitive to the change in the expected rate of profit and insensitive to the interest rate, then Monetarist's assertion b) cannot be established. This instability of private investment makes Keynesian policy necessary. The weakest point of Monetarist lies in their naive view on the private investment demand.
4. The assumption of the movement of money wage rate β) is the main cause of monetarist's assertion a). Owing to the instability of private investment demand, the government is forced to exercise Keynesian policy. Then by β) we must have hyper-inflation. This is a real dilemma of modern capitalism. And this dilemma cannot be resolved by the retreat of the government from market nor by the authoritative incomes policy.

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This paper investigates some finite sample properties of Wu's test, Revankar-Hartley's test and Revankar's test for independence between stochastic regressors and disturbances in a simultaneous equations model. The LRT is also derived.

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When the amount of high powered money is exogenously given by the monetary authority, money supply (e.g. M₂) is endogenously determined by interaction of portfolio choices in various private sectors. Therefore, the relation between money supply and high powered money always suffers from both random and cyclical fluctuations. Since it has been generally recognized that national income is somehow influenced by changes in money supply, the following method of monetary management (the money target policy) appears to be a reliable stabilization policy; namely money supply is directly controlled by any means (e.g.“window guidance”in Japan, “request”in U.K., etc.), and high powered money is accommodatingly (in other words, endogenously) supplied so that the target value of money supply will be consistently achieved. By somewhat extending the simple stochastic macro model introduced by W. Poole, this paper investigates whether such a money target policy is sufficiently stabilizing in the sense that random fluctuation in national income is reduced as much as possible. According to this extended Poole model, the adoption of money target tends to be rather destabilizing in some cases (particularly when random disturbance is relatively large in the economy's aggregate demand). As explained in this paper, this result depends upon the plausibility of the assumption that the public's demand for cash balance is such an increasing function of national income that a rise (decline) in national income will induce a relative decrease (increase) in money supply. At least in Japan, it seems to be impossible to deny this plausibility.

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The first aim of this paper is to estimate the demand and supply functions of the commercial loan market, based on the separation of periods into excess-demand and excess-supply ones. The second aim is to extend a model developed by Hamada et al. in order to include equations which explain the loan rate changes and determine the call rates. Policy implications are derived after estimating these equations.
The estimation period is 1964 III-1973 I. A period is classified as belonging to an excess-supply or excess-demand group depending on whether its Fund Position Diffusion Index in the Bank of Japan's Short-Term Economic Survey (“Tankan”) is plus or minus. According to this standard, the number of excess-demand periods exceeds that of excess-supply periods, as is expected, and the demand and supply equations are well estimated.
The extended model is block-triangular. The quantities demanded in excess-demend periods and the quantities supplied in excess-supply periods, which are not assumed to be observable, are estimated by two methods. Using these estimates, this model can be measured. The estimation results imply that the relationship between the demand for and supply of commercial loans changes the loan rate significantly.
The examination of the above models shows that, in many periods the Bank of Japan's operation of the discount rate and reserve rates does not tend to equilibrate the demand and supply of the commercial loan market.

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