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The nature and role of monetary policy when money is endogenous

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Philip Arestis
Malcolm Sawyer

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Abstract

This paper considers the nature and role of monetary policy when money is modelled as credit money endogenously created within the private sector. There are currently two schools of thought that view money as endogenous: one has been labelled the 'new consensus' in macroeconomics, and the other is the Keynesian endogenous (bank) money approach. The paper first explores the analysis of monetary policy in the 'new consensus' macroeconomic model, followed by an examination of the effectiveness of monetary policy in that analysis. The Keynesian view of endogenous money is discussed, and the role for monetary policy in a Keynesian endogenous monetary policy analysis is considered, including discussion of the objectives and instruments of monetary policy. Copyright 2006, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/cje/bel023
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Article provided by Oxford University Press in its journal Cambridge Journal of Economics.

Volume (Year): 30 (2006)
Issue (Month): 6 (November)
Pages: 847-860
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Handle: RePEc:oup:cambje:v:30:y:2006:i:6:p:847-860

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Eckhard Hein & Achim Truger, 2008. "Fiscal policy in the macroeconomic policy mix: A Critique of the New Consensus Model and a comparison of macroeconomic policies in France, Germany, the UK and Sweden from a Post-Keynesian perspective," IMK Working Paper 03-2008, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute. [Downloadable!]
  2. Philip Arestis & Malcolm Sawyer, 2003. "Macroeconomic Policies of the Economic and Monetary Union: Theorectical Underpinnings and Challenges," Macroeconomics 0308008, EconWPA. [Downloadable!]
  3. Greg Hannsgen, 2004. "The Transmission Mechanism of Monetary Policy: A Critical Review," Macroeconomics 0411004, EconWPA. [Downloadable!]
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  4. Giuseppe Fontana, 2006. "The "New Consensus" View of Monetary Policy: A New Wicksellian Connection?," Economics Working Paper Archive wp_476, Levy Economics Institute, The. [Downloadable!]
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  5. Olivier Allain, 2006. "La modération salariale : le point de vue des (néo-)kaleckiens," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00196500_v1, HAL. [Downloadable!]
  6. Philip Arestis, Malcolm Sawyer, 2003. "Macroeconomic Policies of the Economic Monetary Union: Theoretical Underpinnings and Challenges," Economics Working Paper Archive 385, Levy Economics Institute, The. [Downloadable!]
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