The evaluation of money endogeneity reveals the complex arrangements that form a banking structure and its ability to create money through credit. In this regard, the key features of the Post-Keynesian structuralist approach of money supply are: (i) money is mostly created in the credit market; and (ii) monetary authorities impose some limits to credit creation, however, they do not entirely determine its process. Hereof, both money demand and liquidity preference of agents (banks, firms and consumers) are the underlying forces that sustain these two attributes. The thesis investigates what has determined credit money supply in Brazil and how monetary policy has bounded this process after the adoption of the Inflation Targeting Regime in 1999. We, first, outline the intrinsic characteristics of money supply in a monetary economy of production by addressing the Post-Keynesian structuralist theory on the subject. Thereafter, we focus on the current dominant academic thinking that guides the formulation of monetary policies for numerous Central Banks by almost three decades, i.e. the New Consensus in Macroeconomics (NCM), and assess its divergences to the Post-Keynesian approach. Even though the global financial crisis of 2007-2009 has raised questions about the scientific foundation of the NCM policy rules, it has not shattered the essence of the pre-crisis theoretical elements, which still claims that the Taylor rule and the use of an inflation target should prevail since any alterations on monetary variables is at the best scenario, ephemeral. Afterwards, even though the Brazilian Central Bank has been constantly updating its models, its background lies on the ultimate ability the monetary authority has to control the monetary base. However, we find evidences, both in empirical analyses and in econometric models, that there are other variables which affect the credit supply decision of banks in Brazil: the long-run expectations of interest rates, influenced by the policy short-term interest rate by the provoked alterations on the yield curve of banks; and credit demand, which influences banks decisions to value their wealth and, in consequence, to increase or not the credit supply. Therefore, credit supply in Brazil is endogenously determinedas expected by the Post-Keynesian theoryby the liquidity preference of banks and the demand for funds, being, thus, bounded by the monetary policy.
LIST OF GRAPHSGraph 1. Reserve Requirements by type