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Endogenous money, circuits and financialization

Author

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  • Malcolm Sawyer

    (Leeds University Business School)

Abstract

This paper locates the endogenous money approach in a circuitist framework. It argues for the significance of the credit creation process for the evolution of the economy and the absence of any notion of 'neutrality of money'. Clearing banks are distinguished from other financial institutions as the providers of initial finance in a circuit whereas other financial institutions operate in a final finance circuit. Financialization is here viewed in terms of the growth of financial assets and liabilities, of non-bank financial institutions and changes in the predominant flow of funds between firms, households and rentiers. Some of the issues for the way in which the circuit analysis is developed are considered. This paper reflects research being conducted within the project Financialisation, Economy, Society and Sustainable Development (FESSUD) (www.fessud.eu) which is a 5-year project funded by the European Commission Framework Programme 7 (contract number 266800). Discussions with Marco Passarella have informed the work here though without implicating him in the use to which I have put those discussions. I am grateful to Phillip Arestis for comments on an earlier draft.

Suggested Citation

  • Malcolm Sawyer, 2013. "Endogenous money, circuits and financialization," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(2), pages 230-241, January.
    • Handle: RePEc:elg:rokejn:v:1:y:2013:i:2:p230-241
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    Citations

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    Cited by:

    1. Jo Michell, 2017. "Do Shadow Banks Create Money? ‘Financialisation’ and the Monetary Circuit," Metroeconomica, Wiley Blackwell, vol. 68(2), pages 354-377, May.
    2. Duc Huynh, Toan Luu & Burggraf, Tobias & Nasir, Muhammad Ali, 2020. "Financialisation of natural resources & instability caused by risk transfer in commodity markets," Resources Policy, Elsevier, vol. 66(C).
    3. Li, Boyao, 2022. "The macroeconomic effects of Basel III regulations with endogenous credit and money creation," MPRA Paper 113873, University Library of Munich, Germany.
    4. Malcolm Sawyer & Marco Veronese Passarella, 2017. "The Monetary Circuit in the Age of Financialisation: A Stock-Flow Consistent Model with A Twofold Banking Sector," Metroeconomica, Wiley Blackwell, vol. 68(2), pages 321-353, May.

    More about this item

    Keywords

    endogenous money; monetary circuit; financial instability;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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