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It is not la vie en rose. New insights from Graziani’s theory of monetary circuit

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  • Marco Veronese Passarella

    (University of Leeds)

Abstract

The aim of this paper is twofold. First, it shows how a standard stock-flow consistent model (SFCM) can be modified to embed some fundamental insights from Graziani’s theory of monetary circuit (TMC). Second, it aims at addressing some common mis- conceptions about the TMC. More precisely, it is argued that: a) a market-clearing price mechanism does not necessarily imply a neoclassical-like closure of the model; b) the ways in which SFCMs and the TMC define bank loans are mutually consistent, although they are based on different accounting periods; c) consumer credit is final finance, not initial finance; d) the paradox of profit is not a logical conundrum, but an abstract counterfactual that allows shedding light on a neglected role of government spending; e) overall, the TMC can be regarded as a “Marxian” rendition of Keynes’s method of aggregates.

Suggested Citation

  • Marco Veronese Passarella, 2022. "It is not la vie en rose. New insights from Graziani’s theory of monetary circuit," Working Papers PKWP2209, Post Keynesian Economics Society (PKES).
    • Handle: RePEc:pke:wpaper:pkwp2209
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    References listed on IDEAS

    as
    1. Riccardo Bellofiore & Marco Passarella, 2009. "Finance and the Realization Problem in Rosa Luxemburg: a ‘Circuitist’ Reappraisal," Palgrave Macmillan Books, in: Jean-François Ponsot & Sergio Rossi (ed.), The Political Economy of Monetary Circuits, chapter 6, pages 98-115, Palgrave Macmillan.
    2. Alberto Botta & Eugenio Caverzasi & Daniele Tori, 2015. "Financial–Real-Side Interactions in an Extended Monetary Circuit with Shadow Banking: Loving or Dangerous Hugs?," International Journal of Political Economy, Taylor & Francis Journals, vol. 44(3), pages 196-227, July.
    3. Eugenio Caverzasi & Antoine Godin, 2015. "Post-Keynesian stock-flow-consistent modelling: a survey," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 39(1), pages 157-187.
    4. Augusto Graziani, 1997. "The Marxist Theory of Money," International Journal of Political Economy, Taylor & Francis Journals, vol. 27(2), pages 26-50, June.
    5. Graziani,Augusto, 2003. "The Monetary Theory of Production," Cambridge Books, Cambridge University Press, number 9780521812115.
    6. Marc Lavoie, 2006. "A Post‐Keynesian Amendment To The New Consensus On Monetary Policy," Metroeconomica, Wiley Blackwell, vol. 57(2), pages 165-192, May.
    7. Riccardo Bellofiore & Guglielmo Forges Davanzati & Riccardo Realfonzo, 2000. "Marx Inside the Circuit: Discipline device, wage bargaining and unemployment in a sequential monetary economy," Review of Political Economy, Taylor & Francis Journals, vol. 12(4), pages 403-417.
    8. Malcolm Sawyer & Marco Veronese Passarella, 2017. "The Monetary Circuit in the Age of Financialisation: A Stock-Flow Consistent Model with A Twofold Banking Sector," Metroeconomica, Wiley Blackwell, vol. 68(2), pages 321-353, May.
    9. Riccardo Bellofiore & Marco Veronese Passarella, 2016. "Introduction: the theoretical legacy of Augusto Graziani," Review of Keynesian Economics, Edward Elgar Publishing, vol. 4(3), pages 243-249, July.
    10. Jean-François Ponsot & Sergio Rossi, 2009. "The political economy of monetary circuits : tradition and change in post-keynesian economics," Post-Print halshs-00482625, HAL.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Theory of Monetary Circuit; Stock-Flow Consistent Models; Macroeconomics; Monetary Economics;
    All these keywords.

    JEL classification:

    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E16 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Social Accounting Matrix
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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