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The role of credit in a Keynesian monetary economy

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  • Bertocco Giancarlo

    () (Department of Economics, University of Insubria, Italy)

Abstract

The aim of this paper is to describe the features of a monetary economy on the basis of Keynes's distinction between a real exchange economy and a monetary economy.As is well known, Keynes uses the former term to refer to an economy in which money is merely a tool to reduce the cost of exchanges and whose presence does not alter the structure of the economic system, which remains substantially a barter economy. Monetary economy instead refers to an economic system in which the presence of fiat money radically changes the nature of the exchanges and the characteristics of the production process. Keynes notes that the classical economists formulated an explanation of how the real-exchange economy works, convinced that this explanation could be easily applied to a monetary economy. He believed that this conviction was unfounded and stressed the need to elaborate a "...monetary theory of production, to supplement the real-exchange theories which we already possess." the General Theory constitutes the principal result of Keynes's work. In the General Theory, the reasons for the non-neutrality of money are indentified by highlighting the store of wealth function of money, and this approach has been adopted by most Keynesian economists. The aim of this paper is to show that such an approach only partially explains the reasons for money non-neutrality and that important elements which demonstrate the relevance of the monetary variables emerge when the means of payment function of money is highlighted. Emphasizing the significance of this function means acknowledging that, in a monetary economy, the availability of money is the necessary condition to carry out a spending decision, and therefore to recognise the need to explicitly deal with the issue of the financing of spending decisions significantly influences the evel and composition of income.(...).

Suggested Citation

  • Bertocco Giancarlo, 2002. "The role of credit in a Keynesian monetary economy," Economics and Quantitative Methods qf0222, Department of Economics, University of Insubria.
  • Handle: RePEc:ins:quaeco:qf0222
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    Cited by:

    1. Jose A. Murillo & Sara G. Castellanos, 2004. "Inflation Dynamics’ Micro Foundations: How Important is Imperfect Competition Really?," Econometric Society 2004 Latin American Meetings 78, Econometric Society.
    2. repec:uii:journl:v:3:y:2011:i:2:p:199-210 is not listed on IDEAS
    3. Bertocco Giancarlo, 2004. "Are banks really special? A note on the theory of financial intermediaries," Economics and Quantitative Methods qf04021, Department of Economics, University of Insubria.
    4. Sergio Cesaratto, 2016. "La financiación inicial y final en el circuito monetario y la teoría de la demanda efectiva," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 18(35), pages 47-78, July-Dece.
    5. Giancarlo Bertocco, 2007. "The characteristics of a monetary economy: a Keynes--Schumpeter approach," Cambridge Journal of Economics, Oxford University Press, vol. 31(1), pages 101-122, January.
    6. Giancarlo Bertocco & Andrea Kalajzic, 2014. "The liquidity preference theory: a critical analysis," Economics and Quantitative Methods qf1402, Department of Economics, University of Insubria.
    7. Hein, Eckhard, 2015. "The principle of effective demand: Marx, Kalecki, Keynes and beyond," IPE Working Papers 60/2015, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    8. repec:bla:metroe:v:68:y:2017:i:2:p:228-258 is not listed on IDEAS
    9. 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).
    10. Bill Lucarelli, 2011. "The Economics of Financial Turbulence," Books, Edward Elgar Publishing, number 14252.
    11. Nazim Kadri Ekinci, 2013. "Income distribution in a monetary economy," PSL Quarterly Review, Economia civile, vol. 66(267), pages 435-455.
    12. Giancarlo Bertocco, 2009. "The Relationship Between Saving and Credit from a Schumpeterian Perspective," Journal of Economic Issues, Taylor & Francis Journals, vol. 43(3), pages 607-640.
    13. Passarella, Marco, 2011. "From the village fair to Wall Street. The Italian reception of Minsky’s economic thought," MPRA Paper 49593, University Library of Munich, Germany.
    14. Bruno Bonizzi, 2013. "Capital Flows to Emerging Markets: An alternative Theoretical Framework," Working Papers 186, Department of Economics, SOAS, University of London, UK.
    15. Bertocco Giancarlo, 2003. "The economics of financing firms: the role of banks," Economics and Quantitative Methods qf0312, Department of Economics, University of Insubria.

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