Money and Banking in a Realistic Macro Model

Howells, Peter

doi:10.1007/978-0-230-29166-9_10

Cited by 7 publications

(5 citation statements)

References 24 publications

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“…Asensio distinguishes what he calls the "credit supply", which is a flow, and the "total credit supply," which is a stock; the same distinction is made with the money supply (a flow) and the total money supply (a stock): "The total demand for money at a point in time (stock) therefore is a broader notion compared with the demand for deposits resulting from the demand for credit at that time (flow)" (Asensio 2017, 335). Besides Palley, Fontana and Setterfield (2009) as well as Howells (2009) are accused of this confusion, as is Lavoie (2014, 251). Other authors may have been sloppy at times in this regard, but given that Palley was a student of James Tobin while Lavoie was the coauthor of Wynne Godley, the accusation that Palley and Lavoie are the culprits of such a slipup appears to be rather surprising since Tobin and Godley are considered to be the founders of the SFC approach, one purpose of which is precisely to avoid confusion between stocks and flows.…”

Section: The Main Claims Made By Asensiomentioning

confidence: 99%

Further insights on endogenous money and the liquidity preference theory of interest

Lavoie

Reissl

2019

Journal of Post Keynesian Economics

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Marc Lavoie gratefully acknowledges financial support from the Institute for New Economic Thinking (INET) on the project "Central Banks, Crises, and Income Distribution." Severin Reissl gratefully acknowledges funding from the European Union's Horizon 2020 research and innovation program under the Marie Skłodowska-Curie grant agreement No. 721846 (ExSIDE ITN). The paper was presented at the annual meeting of the Association française d' economie politique, held in Reims in July 2018, at the 22 nd conference of the Forum for Macroeconomics and Macroeconomic Policies (FMM), held in Berlin in October 2018; and at the MACME V workshop, held at the University Paris 13 in December 2018. We are also grateful for the comments of the referee who induced us to clarify the role of the various parameters in determining the sign of the obtained results.

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Section: The Main Claims Made By Asensiomentioning

confidence: 99%

Further insights on endogenous money and the liquidity preference theory of interest

Lavoie

Reissl

2019

Journal of Post Keynesian Economics

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“…Some seek to "recover" traditional LM analysis (see, for example, Tamborini 2009). Others, however, provide accounts of the financial sector that are consistent with the tenets of endogenous money theory, in which the behaviour of commercial banks and the loan-creation process are seen as the nexus of the monetary sector (see, for example, Howells 2009). Indeed, drawing on this second approach and motivated by the recent financial crisis, several authors have already begun to study the significance of exogenous shocks emanating from the private financial sector as a source of macroeconomic instability in new consensus models (Lavoie, 2009;Weise 1 See, for example, Clarida et al (1999) and Woodford (2003) for canonical descriptions of this model.…”

Section: Introductionmentioning

confidence: 89%

Stabilization Policy with an Endogenous Commercial Bank

Setterfield¹,

Seekamm²

2012

Monetary Policy and Central Banking

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“…Besides Palley, Fontana and Setterfield (2009) as well as Howells (2009) are accused of this confusion, as is Lavoie (2014, 251). Other authors may have been sloppy at times in this regard, but given that Palley was a student of James Tobin while Lavoie was the co-author of Wynne Godley, the accusation that Palley and Lavoie are the culprits of such a slip-up appears to be rather surprising since Tobin and Godley are considered to be the founders of the SFC approach, one purpose of which is precisely to avoid confusion between stocks and flows.…”

Section: The Main Claims Made By Asensiomentioning

confidence: 99%

Further Insights on Endogenous Money and the Liquidity Preference Theory of Interest

Lavoie

Reissl

2018

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in ABSTRACTWe present a simple stock-ow consistent (SFC) model to discuss some recent claims made by Angel Asensio in the Journal of Post Keynesian Economics regarding the relationship between endogenous money theory and the liquidity preference theory of the rate of interest. We incorporate Asensio's assumptions as far as possible and use simulation experiments to investigate his arguments regarding the presence of a crowding-out effect, the relationship between interest rates and credit demand, and the ability of the central bank to steer interest rates through varying the stock of money. We show that in a fully-specified SFC model, some of Asensio's conclusions are not generally valid (most importantly, the presence of a crowding-out effect is ambiguous), and that in any case, his use of a non-SFC framework leads him to ignore important mechanisms which can contribute to a better understanding of the behaviour of interest rates. More generally, this paper hence once more demonstrates the utility of the SFC approach in research on monetary economics. We present a simple stock-flow consistent (SFC) model to discuss some recent claims made by Angel Asensio in the Journal of Post Keynesian Economics regarding the relationship between endogenous money theory and the liquidity preference theory of the rate of interest. We incorporate Asensio's assumptions as far as possible and use simulation experiments to investigate his arguments regarding the presence of a crowding-out effect, the relationship between interest rates and credit demand, and the ability of the central bank to steer interest rates through varying the stock of money. We show that in a fully-specified SFC model, some of Asensio's conclusions are not generally valid (most importantly, the presence of a crowding-out effect is ambiguous), and that in any case, his use of a non-SFC framework leads him to ignore important mechanisms which can contribute to a better understanding of the behaviour of interest rates. More generally, this paper hence once more demonstrates the utility of the SFC approach in research on monetary economics.

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Money and Banking in a Realistic Macro Model

Cited by 7 publications

References 24 publications

Further insights on endogenous money and the liquidity preference theory of interest

Further insights on endogenous money and the liquidity preference theory of interest

Stabilization Policy with an Endogenous Commercial Bank

Further Insights on Endogenous Money and the Liquidity Preference Theory of Interest

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