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Rethinking monetary theory in light of Keynes and the crisis


  • Marc Lavoie

    (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique, University of Ottawa [Ottawa])


The purpose of the present paper is to examine the main changes that have occurred or that need to occur in monetary economics, and to do this in light of what Keynes told us 80 years ago in his General Theory, or even more than 85 years ago when he wrote the Treatise on Money. Inflation targeting and central bank independence are re-examined, as are the standard views of the money multiplier and of the fractional-reserve system. Unconventional monetary policies, although previously suggested by Keynes, appear to be a disguised return to Monetarism and the actual impact of quantitative easing must be understood in light of a theory of endogenous money with monetary implementation occurring within a framework where the target interest rate is set at the floor of the corridor.

Suggested Citation

  • Marc Lavoie, 2017. "Rethinking monetary theory in light of Keynes and the crisis," Post-Print hal-01435722, HAL.
  • Handle: RePEc:hal:journl:hal-01435722
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    References listed on IDEAS

    1. Robert Pollin, 1991. "Two Theories of Money Supply Endogeneity: Some Empirical Evidence," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 13(3), pages 366-396, March.
    2. 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.
    3. Marc Lavoie, 2014. "Post-Keynesian Economics: New Foundations," Post-Print hal-01343652, HAL.
    4. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
    5. Marc Lavoie, 2014. "Post-Keynesian Economics," Books, Edward Elgar Publishing, number 12857.
    6. repec:mes:jeciss:v:18:y:1984:i:3:p:771-797 is not listed on IDEAS
    7. Diks, Cees & Panchenko, Valentyn, 2006. "A new statistic and practical guidelines for nonparametric Granger causality testing," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1647-1669.
    8. Marc Lavoie, 2005. "Monetary base endogeneity and the new procedures of the asset-based Canadian and American monetary systems," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 27(4), pages 689-709.
    9. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    10. Hiemstra, Craig & Jones, Jonathan D, 1994. " Testing for Linear and Nonlinear Granger Causality in the Stock Price-Volume Relation," Journal of Finance, American Finance Association, vol. 49(5), pages 1639-1664, December.
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