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Endogenous Money - On Banking Behaviour in New and Post Keynesian Models

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  • Co-Pierre Georg

    ()
    (Friedrich-Schiller-Universitïät Jena, Wirtschaftswissenschaftliche Fakultät)

  • Markus Pasche

    ()
    (Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät)

Abstract

In New Keynesian as well as in Post Keynesian macroeconomic models, money supply is assumed to be endogenous. The reasons for the endogeneity and the role of the financial sector in the supply process, however, are seen very different. In this paper we explicitly derive the behaviour of the banking sector regarding the supply of loans and the demand for reserves from portfolio and liquidity considerations. As a result, the money multiplier as well as the money base are endogenously determined. Although the microeconomics of the bank behaviour is quite simple, credit and money as well as bonds demand depend on policy variables in a non-linear and non-monotonous way.

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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2008-065.

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Date of creation: 12 Aug 2008
Date of revision: 01 Oct 2008
Handle: RePEc:jrp:jrpwrp:2008-065

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Keywords: endogenous money; loans market; bonds market; central banking;

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Cited by:
  1. Ho Dong Ching, 2011. "Endogenous Money - A Structural Model of Monetary Base," Occasional Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, South East Asian Central Banks (SEACEN) Research and Training Centre, number occ52, June.
  2. Stefan Behrendt, 2013. "Monetary Transmission via the Central Bank Balance Sheet," Global Financial Markets Working Paper Series 49-2013, Friedrich-Schiller-University Jena.

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