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The endogenous money hypothesis and securitization: the Euro area case (1999-2010)

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  • M. Lopreite

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    Abstract

    I examine the endogenous money supply hypothesis in the Euro Area using data from 1999 to 2010. I make extensive use of Vector Autoregression (VAR) models with Granger causality procedure to analyze non-cointegrated series and Vector Error Correction (VEC) models for cointegrated series. The cointegration analyses reveals a bidirectional causality between loans and M1 both in the short and long run whereas loans causes variations in the M2 mainly in the short run. However, according to the Granger causality test there is a one-way causality from loans to M3 but not from loans to industrial production index. The results are confirmed by adjusting the loans series for securitization activity in the Euro Area and partially support the accommodationist view.

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    File URL: http://swrwebeco.econ.unipr.it/RePEc/pdf/I_2012-02.pdf
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    Bibliographic Info

    Paper provided by Department of Economics, Parma University (Italy) in its series Economics Department Working Papers with number 2012-EP02.

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    Length: 20 pages
    Date of creation: 2012
    Date of revision:
    Handle: RePEc:par:dipeco:2012-ep02

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    1. Basil J. Moore, 1979. "The Endogenous Money Stock," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 2(1), pages 49-70, October.
    2. Thomas I. Palley, 1998. "Accommodationism, Structuralism, and Superstructuralism," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 21(1), pages 171-173, October.
    3. Basil J. Moore, 1991. "Money Supply Endogeneity: "Reserve Price Setting" or "Reserve Quantity Setting"?," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 13(3), pages 404-413, April.
    4. Giuseppe Fontana, 2004. "Hicks on monetary theory and history: money as endogenous money," Cambridge Journal of Economics, Oxford University Press, vol. 28(1), pages 73-88, January.
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    8. Kevin S. Nell, 2001. "The Endogenous/Exogenous Nature of South Africa's Money Supply under Direct and Indirect Monetary Control Measures," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 23(2), pages 313-329, January.
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    13. Basil Moore, 1998. "Accommodation to Accommodationism: A Note," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 21(1), pages 175-178, October.
    14. Thomas I. Palley, 2002. "Endogenous Money: What it is and Why it Matters," Metroeconomica, Wiley Blackwell, vol. 53(2), pages 152-180, 05.
    15. Philip Arestis & Malcolm Sawyer, 2003. "The Nature and Role of Monetary Policy When Money Is Endogenous," Economics Working Paper Archive wp_374, Levy Economics Institute.
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    17. Thomas I. Palley, 1996. "Accommodationism versus Structuralism: Time for an Accommodation," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 18(4), pages 585-594, July.
    18. Giuseppe Fontana, 2003. "Post Keynesian Approaches to Endogenous Money: A time framework explanation," Review of Political Economy, Taylor & Francis Journals, vol. 15(3), pages 291-314.
    19. Lavoie, Marc, 1996. "Horizontalism, Structuralism, Liquidity Preference and the Principle of Increasing Risk," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(3), pages 275-300, August.
    20. Cifter, Atilla & Ozun, Alper, 2007. "Monetary Transmission Mechanism in the New Economy: Evidence from Turkey (1997-2006)," MPRA Paper 2486, University Library of Munich, Germany.
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