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Endogenous Money - On Banking Behaviour in New and Post Keynesian Models

Author

Listed:
  • Co-Pierre Georg

    (Friedrich-Schiller-Universitïät Jena, Wirtschaftswissenschaftliche Fakultät)

  • Markus Pasche

    (Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät)

Abstract

In New Keynesian as well as in Post Keynesian macroeconomic models, money supply is assumed to be endogenous. The reasons for the endogeneity and the role of the financial sector in the supply process, however, are seen very different. In this paper we explicitly derive the behaviour of the banking sector regarding the supply of loans and the demand for reserves from portfolio and liquidity considerations. As a result, the money multiplier as well as the money base are endogenously determined. Although the microeconomics of the bank behaviour is quite simple, credit and money as well as bonds demand depend on policy variables in a non-linear and non-monotonous way.

Suggested Citation

  • Co-Pierre Georg & Markus Pasche, 2008. "Endogenous Money - On Banking Behaviour in New and Post Keynesian Models," Jena Economics Research Papers 2008-065, Friedrich-Schiller-University Jena, revised 01 Oct 2008.
    • Handle: RePEc:jrp:jrpwrp:2008-065
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    File URL: https://oweb.b67.uni-jena.de/Papers/jerp2008/wp_2008_065.pdf
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    Citations

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    Cited by:

    1. Maryna Korol & Ihor Korol & Olena Zayats, 2021. "Monetary Circulation And Banks In The Interpretation Of The Main Economic Schools," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 7(4).
    2. Ho Dong Ching, 2011. "Endogenous Money - A Structural Model of Monetary Base," Occasional Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number occ52.
    3. Stefan Behrendt, 2013. "Monetary Transmission via the Central Bank Balance Sheet," Global Financial Markets Working Paper Series 49-2013, Friedrich-Schiller-University Jena.
    4. Stefan Behrendt, 2017. "Unconventional Monetary Policy Effects on Bank Lending in the Euro Area," Jena Economics Research Papers 2017-002, Friedrich-Schiller-University Jena.

    More about this item

    Keywords

    endogenous money; loans market; bonds market; central banking;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics

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