Money flows, savings and financial rights: on Tsiang Sho-Chieh’s theory of money flows and monetary logic of China’s financial reform




The School of Finance, China Financial Policy Research Center, Renmin University of China


This paper intends to present a review of the pros and cons of flow and stock approaches, a historically controversial topic in monetary theory. In view of its relation to savings effect and the structure of financial rights, this issue carries special significance for the understanding of the monetary logic of China’s financial reform. The paper finds that flow approach, represented by the efforts of Tsiang Sho-Chieh and other economists, seemed to have initially held the upper hand, but due to its rigid confinement to the complete market assumption and its failure to tackle the challenge posed by the dual logic of origins of money, their analysis ended in vain in the effort to reestablish a theoretical paradigm. Later, financial reform in China offers a rare opportunity to test advantages and disadvantages of the two approaches, since it brings to the surface the structure of financial rights which had been hiding underneath. Thus monetary analysis might be able to step onto the correct path leading to the reestablishment of the institutional paradigm of financial analysis.


flow approach;savings effect;structure of financial rights;institutional paradigm of financial analysis


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Total: 15 articles

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