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A third era of credit theory? Endogenous money from Wolfgang Stützel's balance mechanics perspective

Author

Listed:
  • Christoph Ellermann

    (European Central Bank, Frankfurt, Germany)

  • Fabian Lindner

    (Macroeconomic Policy Institute (IMK), Düsseldorf, Germany)

  • Severin Reissl

    (Kingston University, Kingston upon Thames, United Kingdom)

  • Ruben Tarne

Abstract

We present an introduction to the translation of a part of the stock-flow consistent (SFC) framework published by the German economist Wolfgang Stützel in 1958, which follows in this issue. While not a quantitative model, Stützel's ‘balance mechanics’ has some features which still stand out today when compared with contemporary SFC literature. Among these strengths is an accounting decomposition of all economic transactions along three dimensions and a careful distinction between propositions which are true at different levels of aggregation, so as to avoid fallacies of composition. We argue that ‘balance mechanics’ provides value added, both as a didactic tool and as a complement to formal SFC modelling exercises, since it can be used to assess the validity and coherence of economic propositions. We demonstrate this claim by translating a section on the so-called ‘third stage of credit theory’ in the translation that follows this introductory paper. Therein, Stützel synthesises the two opposing positions in the controversy on the causal priority of deposits versus loans in banking.

Suggested Citation

  • Christoph Ellermann & Fabian Lindner & Severin Reissl & Ruben Tarne, 2017. "A third era of credit theory? Endogenous money from Wolfgang Stützel's balance mechanics perspective," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(1), pages 13-22, April.
  • Handle: RePEc:elg:ejeepi:v:14:y:2017:i:1:p13-22
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    Cited by:

    1. Tarne, Ruben, 2018. "Proposals for monetary reform: A critical assessment using the general quantity equation by Wolfgang Stützel," IPE Working Papers 102/2018, Berlin School of Economics and Law, Institute for International Political Economy (IPE).

    More about this item

    Keywords

    Stützel; balance mechanics; endogenous money; stock-flow consistency;
    All these keywords.

    JEL classification:

    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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