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The nature and role of monetary policy when money is endogenous

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  • Philip Arestis
  • Malcolm Sawyer

Abstract

This paper considers the nature and role of monetary policy when money is modelled as credit money endogenously created within the private sector. There are currently two schools of thought that view money as endogenous: one has been labelled the 'new consensus' in macroeconomics, and the other is the Keynesian endogenous (bank) money approach. The paper first explores the analysis of monetary policy in the 'new consensus' macroeconomic model, followed by an examination of the effectiveness of monetary policy in that analysis. The Keynesian view of endogenous money is discussed, and the role for monetary policy in a Keynesian endogenous monetary policy analysis is considered, including discussion of the objectives and instruments of monetary policy. Copyright 2006, Oxford University Press.

Suggested Citation

  • Philip Arestis & Malcolm Sawyer, 2006. "The nature and role of monetary policy when money is endogenous," Cambridge Journal of Economics, Oxford University Press, vol. 30(6), pages 847-860, November.
  • Handle: RePEc:oup:cambje:v:30:y:2006:i:6:p:847-860
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    Cited by:

    1. Eckhard Hein & Achim Truger, 2011. "Fiscal Policy in the Macroeconomic Policy Mix: A Critique of the New Consensus Model and a Comparison of Macroeconomic Policies in France, Germany, the UK and Sweden from a Post-Keynesian Perspective," Chapters,in: Credit, Money and Macroeconomic Policy, chapter 12 Edward Elgar Publishing.
    2. Alfonso Palacio Vera, 2009. "Some Reflections on the Theory of the “Liquidity Trap”," Documentos de trabajo de la Facultad de Ciencias Económicas y Empresariales 09-02, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales.
    3. Eckhard Hein & Engelbert Stockhammer, 2010. "Macroeconomic Policy Mix, Employment and Inflation in a Post-Keynesian Alternative to the New Consensus Model," Review of Political Economy, Taylor & Francis Journals, vol. 22(3), pages 317-354.
    4. Jesús Ferreiro & M. Teresa García-del-Valle & Carmen Gómez, 2013. "An Analysis of the Convergence of the Composition of Public Expenditures in European Union Countries," American Journal of Economics and Sociology, Wiley Blackwell, vol. 72(4), pages 799-825, October.
    5. Duccio Cavalieri, 2004. "On Some Equilibrium and Disequilibrium Theories of Endogenous Money: A Structuralist View," History of Economic Ideas, Fabrizio Serra Editore, Pisa - Roma, vol. 12(3), pages 51-83.
    6. Philip Arestis & Malcolm Sawyer, 2003. "Does the stock of money have any causal significance?," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 56(225), pages 113-136.
    7. Eckhard Hein & Christian Schoder, 2011. "Interest rates, distribution and capital accumulation -- A post-Kaleckian perspective on the US and Germany," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(6), pages 693-723, November.
    8. Cendejas, José Luis & Castañeda, Juan E. & Muñoz, Félix-Fernando, 2014. "Business cycle, interest rate and money in the euro area: A common factor model," Economic Modelling, Elsevier, vol. 43(C), pages 136-141.
    9. Daniela Magalhães Prates & Luiz Fernanda De Paula & Barbara Fritz, 2016. "Keynes At The Periphery: Currency Hierarchy And Challenges For Economic Policy In Emerging Economies," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42ndd Brazilian Economics Meeting] 110, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    10. Giuseppe Fontana, 2006. "The 'New Consensus' View of Monetary Policy: A New Wicksellian Connection?," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 3(2), pages 263-278.
    11. Raberto, Marco & Teglio, Andrea & Cincotti, Silvano, 2012. "Debt, deleveraging and business cycles: An agent-based perspective," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 6, pages 1-49.
    12. Greg Hannsgen, 2007. "The Transmission Mechanism of Monetary Policy: A Critical Review," Chapters,in: A Handbook of Alternative Monetary Economics, chapter 13 Edward Elgar Publishing.
    13. Philip Arestis & Malcolm Sawyer, 2004. "Macroeconomic policies of the Economic and Monetary Union: theoretical underpinnings and challenges," Chapters,in: Neo-Liberal Economic Policy, chapter 7 Edward Elgar Publishing.
    14. M. Lopreite, 2012. "The endogenous money hypothesis and securitization: the Euro area case (1999-2010)," Economics Department Working Papers 2012-EP02, Department of Economics, Parma University (Italy).
    15. Olivier Allain, 2006. "La modération salariale : le point de vue des (néo-)kaleckiens," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00196500, HAL.
    16. María Cuenca Coral, Felipe Amaya, Bryan Castrillón, 2015. "La política monetaria y el crecimiento económico en Colombia, 1990-2010," REVISTA CIFE, UNIVERSIDAD SANTO TOMÁS, February.
    17. Alfonso Palacio Vera, 2008. "Money wage rigidity, monopoly power and hysteresis," Documentos de trabajo de la Facultad de Ciencias Económicas y Empresariales 08-02, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales.
    18. repec:wsi:acsxxx:v:15:y:2012:i:supp0:n:s0219525912500403 is not listed on IDEAS
    19. Andrea Teglio & Marco Raberto & Silvano Cincotti, 2012. "The Impact Of Banks' Capital Adequacy Regulation On The Economic System: An Agent-Based Approach," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 15(supp0), pages 1-27.
    20. Robert Pollin & James Heintz, 2013. "Study of U.S. Financial System," FESSUD studies fstudy10, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    21. Jan Korda, 2010. "Komparace nového konsensu jako teoretického rámce cílování inflace s postkeynesovskou ekonomií
      [A Comparison of New Consensus as a Theoretical Framework of Inflation Targeting with Post-Keynesian E
      ," Politická ekonomie, University of Economics, Prague, vol. 2010(1), pages 92-104.

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