Theory Of Endogenous Money Research Articles

Endogenous money and shareholders' funds in the classical theory of banking

By its nature, bank money is endogenous, but its issuing is risky and presupposes the presence of banks' shareholders' funds. Shareholders' funds give banks the means of dealing with the difficulties involved in the process of money creation and which are inherent to the banking activity: convertibility constraint, credit and liquidity risks. Unlike the Richardian paradigm, Smith's ‘real bill theory’ and Thornton's ‘lender of last resort theory’ point out the functions of shareholder's funds. Therefore their monetary-banking approachs seem more complementary than contradictory. In other respects, the theory of endogenous money and credit introduces risks and capital in the analysis of exchange and lead to questioning the classical market theory constructed on the model of bartering

Endogenous money and the business cycle

The theory of endogenous money has tended to reduce to a debate over the slope of the LM. This is because endogenous money is a dynamic phenomenon, and its implications are masked in static models such as ISLM. This paper examines the role of endogenous money in credit-driven business cycles. A key distinction concerns that between bank and direct credit. The former is more expansionary because it involves creation of new money balances, whereas the latter involves transfer of existing money balances. The paper provides a simulation revealing instability emerges at a lower debt-income ratio as the share of bank debt in total debt rises.

Controversies in Monetary Economics: Ideas, Issues and Policy.

Part 1 Some introductory remarks on and economic theory and policy: Keynes's concept of Monetary Production the lessons of history the influence of monetarism some important themes in monetary economics plan of the book. Part 2 The nature and functions of - a re-examination: the implicit mainstream view the new monetary economics a return to gold? and credit the choice of the monetary standard. Part 3 Monetarism and the quantity theory of money: the quantity theory of Friedman's restatement and the monetary theory of nominal income Friedman's policy proposals monetarism and the New Classical school monetarism and free banking endogenous money. Part 4 The real bills doctrine, interest rate pegging and endogenous money: credit and commodity the Real Bills doctrine interest rates and inflation the post theory of endogenous money. Part 5 How do central banks get their power?: central banks and government public goods and natural monopolies centralizing tendencies in monetary systems potential empirical evidence. Part 6 Money, interest rates and output: nominal rigidities and short-run monetary non-neutrality the natural rate of interest alternative theories of interest. Part 7 The international economy and alternative exchange rate regimes: financial networks and national economies the Hegemonic system fixed and floating exchange rates and currency unions implications of alternative exchange rate regimes the political dimension the monetarist connection what would be a Keynesian approach to currency and exchange rate issues? exchange rate policy and cheap money optimal currency areas? experience with existing floating rate regimes are fixed exchange rates necessary for free trade? exchange rates and capital mobility. Part 8 The costs of inflation: the trade-off between inflation and unemployment the suggested costs of inflation inflation and the monetary system of production the costs of a perfectly anticipated inflation when pays to interest the menu costs of inflation distributional issues indexation alternative inflation norms. (Part contents).

Jacques Le Bourva's theory of endogenous credit-money

About 30 years ago, Jacques Le Bourva published two little-known articles that clearly set out the present post-Keynesian theory of endogenous money developed by Kaldor and Moore. The main features of these two articles are presented, in particular Le Bourva's belief that reverse causation, rather than the instability of the velocity function, is the key objection to the quantity theory of money and the mainstream theory of inflation. Other features include a graphical and an algebraic pedagogical representation of the theory of endogenous money, the use of the Banking school's efflux/reflux mechanism, the dismissal of the money multiplier, and the impossibility of an excess supply of money. Le Bourva's theory of inflation also resembles that adopted by many post-Keynesians, in which price increases due to excessive wage demands and attempts by firms to raise their profit margins to finance investment.

Le «finance motive» et la réinterprétation de la pensée de Keynes : un commentaire du texte d'Augusto Graziani

Three questions are discussed in the comment of Graziani's paper : — it is suggested that the theory of endogenous money, expounded by A. Graziani, should be completed by the explicitation of the system of rules which is at its root ; — the role of financial markets is not only to finance the planned expenditures but also to avoid the bankruptcies due to the discrepancies between expectations and realisations ; — the "circuit approach" does not go very far into the study of the rules of circulation.

The Post Keynesian Theory of Money: A Summary and an Eastern European Example

The theory of endogenous money has received much attention recently in the post Keynesian literature. A major theme for post Keynesians is that monetary authorities do not have complete control over the supply of credit and hence cannot effectively control aggregate spending: business borrowers and banks together, at least in the short period, determine the amount of credit supplied, and in this sense, the demand for credit creates its own supply. As is pointed out recently by Kregel (1984-85), Lavoie (1984), and Minsky (1980, 1981, 1985), the key to understanding why the supply of credit does not necessarily constrain spending lies in a constellation of political and institutional factors operating on the relationship between large corporations, on the one hand, and commercial banks and the central bank, on the other. The prevailing post Keynesian view is that when firms decide to take on additional investment, given their understanding of market conditions for the sale of additional output, finance for the projects is rarely an operating constraint. Such institutional factors as credit supply agreements (e.g., revolving credits, refinancing credits) which obligate banks to supply credit on demand (Minsky, 1985, p. 15), the trend for banks to augment assets with business debt