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Bofinger and Ries versus Borio and Disyatat: macroeconomics after endogenous money. A brief note

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  • Sergio Cesaratto

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Abstract

A paper by Peter Bofinger and Mathias Ries (2017a/b) strays from the recent rethinking in monetary analysis to criticise Summers’ “saving glut” explanation of the prevalence of low real interest rates. A similar critical perspective is held by Borio and Disyatat (e.g. 2011a/b, 2015), who are criticised, however, by Bofinger and Reis for their Wicksellian background. In this note, we compare and assess these two different views. Both Bofinger and Reis (B&R) and Borio and Disyatat (B&D) reject traditional “loanable fund theory” in favour of an endogenous money view of credit, but while B&R regard conventional marginalist (real) theory as inconsistent with the endogenous money view, B&D, following Wicksell, regard it as consistent. We sympathize with B&R’s criticism of conventional theory, especially their Keynesian view of the interest rate as a purely monetary phenomenon. Interestingly, B&R refer to the problems of marginalist capital theory as undermining the natural interest rate concept

Suggested Citation

  • Sergio Cesaratto, 2017. "Bofinger and Ries versus Borio and Disyatat: macroeconomics after endogenous money. A brief note," Department of Economics University of Siena 763, Department of Economics, University of Siena.
  • Handle: RePEc:usi:wpaper:763
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    File URL: http://repec.deps.unisi.it/quaderni/763.pdf
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    References listed on IDEAS

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    1. Christian Gehrke, 2003. "On the Transition from Long-period to Short-period Equilibria," Review of Political Economy, Taylor & Francis Journals, vol. 15(1), pages 85-106.
    2. Marc Lavoie, 2014. "Post-Keynesian Economics: New Foundations," Post-Print hal-01343652, HAL.
    3. Paul A. Samuelson, 1966. "A Summing Up," The Quarterly Journal of Economics, Oxford University Press, vol. 80(4), pages 568-583.
    4. Marc Lavoie, 2014. "Post-Keynesian Economics," Books, Edward Elgar Publishing, number 12857, November.
    5. ., 2014. "Essentials of heterodox and post-Keynesian economics," Chapters,in: Post-Keynesian Economics, chapter 1, pages 1-71 Edward Elgar Publishing.
    6. Ariel Dvoskin, 2016. "An unpleasant dilemma for contemporary general equilibrium theory," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 23(2), pages 198-225, April.
    7. repec:bla:metroe:v:68:y:2017:i:2:p:228-258 is not listed on IDEAS
    8. Jakab, Zoltan & Kumhof, Michael, 2015. "Banks are not intermediaries of loanable funds – and why this matters," Bank of England working papers 529, Bank of England.
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    More about this item

    Keywords

    Bofinger; Borio; Dysiatat; monetary theory; capital theory; Wicksell; natural interest rate;

    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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