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Monetary Policy Implementation in the Eurozone - the Concept of Endogenous Money

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  • Svatopluk Kapounek

    () (Department of Finance, Faculty of Business and Economics, Mendel University in Brno)

Abstract

The author focuses on the current problems of the common monetary policy implementation in the Eurozone in context of output stabilization function. The author focuses on the money demand function stability and its estimation. The stable money demand function ensures that the money supply would have predictable impact on the macroeconomic variables such as inflation and real economic growth. The instability is described by PoskeynesiansÌ assumptions of money endogeneity. Although central banks may have certain control over the money supply, they cannot fix the stock of money in a country. According to the PostkeynesiansÌ assumptions, the enterprises do not need ex ante stock of savings in order to carry out investment decisions. The causality is directed from economic activity to money demand. Interaction between the money demand and supply is arranged by multiplier effect of deposits.

Suggested Citation

  • Svatopluk Kapounek, 2011. "Monetary Policy Implementation in the Eurozone - the Concept of Endogenous Money," MENDELU Working Papers in Business and Economics 2011-12, Mendel University in Brno, Faculty of Business and Economics.
  • Handle: RePEc:men:wpaper:12_2011
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    References listed on IDEAS

    as
    1. Louis-Philippe Rochon, 2006. "Endogenous Money, Central Banks and the Banking System: Basil Moore and the Supply of Credit," Chapters,in: Complexity, Endogenous Money and Macroeconomic Theory, chapter 9 Edward Elgar Publishing.
    2. von Kalckreuth, Ulf & Hernando, Ignacio & Generale, Andrea & Chatelain, Jean Bernard & Vermeulen, Philip, 2001. "Firm Investment and Monetary Policy Transmission in the Euro Area," Discussion Paper Series 1: Economic Studies 2001,20, Deutsche Bundesbank.
    3. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
    4. El-Shagi, Makram & Giesen, Sebastian, 2010. "Money and Inflation: The Role of Persistent Velocity Movements," IWH Discussion Papers 2/2010, Halle Institute for Economic Research (IWH).
    5. Pomenkova, Jitka & Kapounek, Svatopluk, 2009. "Interest rates and prices causality in the Czech Republic - Granger approach," MPRA Paper 27390, University Library of Munich, Germany.
    6. Basil J. Moore, 1979. "The Endogenous Money Stock," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 2(1), pages 49-70, October.
    7. Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, vol. 62(4), pages 540-552, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    monetary transmission mechanism; money endogeneity; European integration process; Post- Keynesian economics;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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