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Endogenous Finance

In: Post Keynesian Economics

Author

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  • Thomas I. Palley

    (New School for Social Research)

Abstract

The theory of endogenous money represents the central concern of Post Keynesian monetary theory. This endogeneity of money has major significance for the process governing the evolution of aggregate nominal demand, and is vital for understanding the process of inflation. However, the focus on the money supply has naturally concentrated attention on the the banking sector, yet banks represent only one amongst many financial intermediaries, and financial intermediaries are themselves only one source of finance. This suggests that an understanding of the interaction between financial markets and goods markets requires the inclusion of wider forms of finance than just bank credit. Such an approach harks back to the monetary theory of the Radcliffe Committee (see Rowan, 1961), and it also appears to be implicit in Wray’s (1992) linking of endogenous money with Minsky’s (1977, 1982) theory of financial instability.

Suggested Citation

  • Thomas I. Palley, 1996. "Endogenous Finance," Palgrave Macmillan Books, in: Post Keynesian Economics, chapter 8, pages 126-143, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-37412-6_8
    DOI: 10.1057/9780230374126_8
    as

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