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Intermediation, Money Creation, and Keynesian Macrodynamics in Multi-agent Systems

Author

Listed:
  • Bill Gibson
  • Mark Setterfield

Abstract

This paper offers a simple computational model of monetary creation, derived from individual agent behavior, that provides additional support for the well-known and more or less universally accepted idea that money creation is inevitable in demand-driven Keynesian economies. The endogeneity of money is linked to asynchronous production, in which investment is set autonomously by a combination of animal spirits and capacity utilization, while savings adjusts to bring about macroeconomic equilibrium. It is seen that once these Keynesian motifs are translated into the agent-based framework, endogenous money arises as a natural consequence of the model. The contribution of the paper is twofold. First, it links endogenous money creation to decision making in real historical time—two shibboleths of post-Keynesian macroeconomics. Second, it suggests a fruitful cross-fertilization between post-Keynesian economics and the methods of agent-based modeling.

Suggested Citation

  • Bill Gibson & Mark Setterfield, 2018. "Intermediation, Money Creation, and Keynesian Macrodynamics in Multi-agent Systems," Review of Political Economy, Taylor & Francis Journals, vol. 30(2), pages 154-171, April.
    • Handle: RePEc:taf:revpoe:v:30:y:2018:i:2:p:154-171
    DOI: 10.1080/09538259.2018.1458494
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    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • C00 - Mathematical and Quantitative Methods - - General - - - General

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