Advanced Search
MyIDEAS: Login to save this paper or follow this series

Locked-in and Sticky Textbooks: Mainstream Teaching of the Money Supply Process

Contents:

Author Info

  • Boermans, Martijn Adriaan
  • Moore, Basil J

Abstract

Current macro-economic textbooks provide a fatally misleading description of the money supply process in modern economies. Over the past 20 years Post Keynesian authors have established conclusively that despite strictly-enforced cash reserve requirements, changes in the supply of bank deposits are not determined exogenously by central bank open market operations, but are endogenously determined by changes in bank borrowers’ demand for credit. Nevertheless the vast majority of undergraduate macroeconomic textbooks continue to teach the high-powered-base “money-multiplier” paradigm that the supply of money is exogenously determined by the central bank. Few texts recognize that interest rate targeting renders the high-powered base endogenous. This paper summarizes the extent mainstream macroeconomic textbooks are “locked in” and “sticky,” and fail both in the teaching of monetary policy and in proper scientific discourse.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://mpra.ub.uni-muenchen.de/14845/
File Function: original version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14845.

as in new window
Length:
Date of creation: Nov 2008
Date of revision: Apr 2009
Handle: RePEc:pra:mprapa:14845

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: macroeconomic textbooks; money supply; endogenous money paradigm; EMP; Post Keynesian economics; paradigm shift;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. David H. Romer, 2000. "Keynesian Macroeconomics without the LM Curve," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 14(2), pages 149-169, Spring.
  2. Alessandro Vercelli, 1999. "The evolution of IS-LM models: empirical evidence and theoretical presuppositions," Journal of Economic Methodology, Taylor & Francis Journals, Taylor & Francis Journals, vol. 6(2), pages 199-219.
  3. Paul Davidson, 2008. "Is the current financial distress caused by the subprime mortgage crisis a Minsky moment? or is it the result of attempting to securitize illiquid noncommercial mortgage loans?," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 30(4), pages 669-676, July.
  4. Goodhart, Charles A E, 1994. "What Should Central Banks Do? What Should Be Their Macroeconomic Objectives and Operations?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 104(427), pages 1424-36, November.
  5. James Tobin, 1969. "Money and Income: Post Hoc Ergo Propter Hoc?," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 283, Cowles Foundation for Research in Economics, Yale University.
  6. Basil J. Moore, 1988. "The Endogenous Money Supply," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 10(3), pages 372-385, April.
  7. Howells, Peter & Hussein, Khaled, 1998. "The Endogeneity of Money: Evidence from the G7," Scottish Journal of Political Economy, Scottish Economic Society, vol. 45(3), pages 329-40, August.
  8. Giuseppe Fontana, 2004. "Rethinking Endogenous Money: A Constructive Interpretation Of The Debate Between Horizontalists And Structuralists," Metroeconomica, Wiley Blackwell, Wiley Blackwell, vol. 55(4), pages 367-385, November.
  9. Davidson, Paul, 1972. "Money and the Real World," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 82(325), pages 101-15, March.
  10. Giuseppe Fontana, 2003. "Post Keynesian Approaches to Endogenous Money: A time framework explanation," Review of Political Economy, Taylor & Francis Journals, Taylor & Francis Journals, vol. 15(3), pages 291-314.
  11. Marc Lavoie, 2005. "Monetary base endogeneity and the new procedures of the asset-based Canadian and American monetary systems," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 27(4), pages 689-709, July.
  12. Thomas I. Palley, 2002. "Endogenous Money: What it is and Why it Matters," Metroeconomica, Wiley Blackwell, Wiley Blackwell, vol. 53(2), pages 152-180, 05.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:14845. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.