Endogenous versus exogenous money: Does the debate really matter?

Sieroń, Arkadiusz

doi:10.1016/j.rie.2019.10.003

Cited by 14 publications

(7 citation statements)

References 22 publications

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“…Derivatives, mutual funds, real estate assets, debt securities and other instruments resulting from financial innovations create a vast array of products for financial transactions that were excluded from the calculations. model of endogenous fragile financial markets (Minsky, 1986) or positive feedback theory of financial crises (Shiller, 2016). A positive change in monetary policy can not only increase the aggregate demand, but also increase optimism among investors.…”

Section: Panel Estimationsmentioning

confidence: 99%

“…A "new consensus" (Arestis & Sawyer, 2006) appeared to have been reached, but the advent of quantitative easing (QE) policies that became widespread after the financial crisis of 2007-2008 rekindled the debate (see e.g. Sieroń, 2019;Sawyer, 2020;Fontana et al, 2020). As discussed by Lavoie and Fiebiger (2018), the monetarist view is generally that an increase in bank reserves automatically leads to an increase in the broad money, which can lead to higher nominal spending, higher nominal GDP, and higher inflation.…”

Section: Introductionmentioning

confidence: 99%

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Endogenous money supply, global liquidity and financial transactions: Panel evidence from OECD countries

Śliwiński

2023

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Research background: Endogenous money creation is an inherent feature of today?s economies and widely accepted phenomenon. As the various theories of money rely on the money quantity equation, most empirical research is heading towards the analysis of the two-way relationship between the quantity of money and nominal GDP. In today's world, with the extraordinary development of the financial sector, money is used not only for transactions in the real economy, but increasingly also for purchasing financial assets. This observation was absorbed by Werner in the quantity theory of disaggregated credit. Purpose of the article: The aim of the paper is to join the debate on endogenous character of money supply by tasting a disaggregated equation of money. It assumes that the domestic money supply is positively determined not only by growth in GDP-based transactions but also by growth in non-GDP-based transactions (financial transactions). Additionally, it is assumed that in the age of globalization it can be also positively influenced by the global liquidity. Methods: Testing of the above-mentioned hypotheses takes place with the use of panel unit roots tests, panel Granger causality test and panel estimations (OLS, models with fixed/random effects, GMM). In the study, annual data from 2002 to 2018 for OECD countries were chosen for statistical research. Findings & value added: The article confirms the hypothesis that real and financial economic activity together with global liquidity positively influence domestic credit and thus money supply. As the amount of money in an economy is driven not only by the real economy but also by the financial economy, prudential regulations that restrict leverage (and thus control the amount of credit) and limit risk-taking during price bubbles periods should be therefore considered. In the research, the reaction of domestic money supply to the changes in US money supply is positive. It confirms the importance of spill-over effect of expansionary policy in major economies to other economies.

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Section: Panel Estimationsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Endogenous money supply, global liquidity and financial transactions: Panel evidence from OECD countries

Śliwiński

2023

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“…This stability enables the central bank to effectively control the money supply by controlling the monetary base. According to this theory, monetary policy transmission mechanisms depend mainly on the money supply channel (Sieroń, 2019).…”

Section: The Exogenous Theorymentioning

confidence: 99%

Money Supply Behavior in Egypt (2004-2019)

S.H.¹,

A.T.²

2022

African Journal of Economics and Sustainable Development

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This study aims to investigate whether money supply behaviour in Egypt is exogenously or endogenously determined using data from 2004 to 2019. It aims to identify the determinants of money supply in Egypt and the most important tools used by the central bank to manage it. The study employs the Johansen-Juselius test (1990) to examine the long-run determinants of money supply in Egypt and the error correction model to examine the short-run determinants. We conclude that real GDP, discount rate, budget deficit, and net foreign assets have significant long-term effects on money supply, whereas exchange rate and net domestic assets have no effects. We recommend higher degrees of cooperation between the Central Bank of Egypt and the institutions responsible for the formulation of financial and commercial policies. we also recommend that the central bank continue monitoring foreign assets and strengthen its supervisory activities on banking institutions.

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“…Monetary policymakers use money supply synonymously with the key interest rate, usually referred to as the repo rate in South Africa. The central bank influences the financial markets by creating conditions where it becomes attractive for market participants to buy or sell stocks (Sieroń, 2019). In broader terminology, market response to increase or reduce money supply can be called expansionary or contractionary monetary policy (Abel et al 2011).…”

Section: Source: Author's Own Computationsmentioning

confidence: 99%

Parsimony and Liquidity Ratio Effects on Capital Markets: Evidence from South Africa

Mabeba¹

2022

EJEF

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From a sample period of 30 years, the study shows that a parsimonious model helps explain the effect of the liquidity ratio on equities and bonds in South Africa. Guided by the combined theoretical model of liquidity preference theory and endogenous money approach, multivariate econometrics modeling is applied in this study. Findings show that as market participants improve their ability to pay off their short-term debts, as measured by liquidity ratio, they tend to decrease raising capital in the equity market and increase borrowing from the bond market. These findings are consistent with the parsimonious model in both the equity and bond markets. Further, the results indicate that the liquidity ratio is inversely associated with the equity index and positively associated with the bond index. All findings are obtained from a long-run horizon in the South African capital markets. Motivated by the financial stability developments in the private and public sectors, the findings contribute to capital formation by financial markets into the mainstream economy. The relationship between liquidity ratio and capital markets can serve as a guide to monitoring the strength of financial leverage and financial stability.

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Endogenous versus exogenous money: Does the debate really matter?

Cited by 14 publications

References 22 publications

Endogenous money supply, global liquidity and financial transactions: Panel evidence from OECD countries

Endogenous money supply, global liquidity and financial transactions: Panel evidence from OECD countries

Money Supply Behavior in Egypt (2004-2019)

Parsimony and Liquidity Ratio Effects on Capital Markets: Evidence from South Africa

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