DOCSLIB.ORG

Horizontalists and Verticalists: an Appraisal 25 Years Later 383 Ulrich Bindseil and Philipp J

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Horizontalists and Verticalists: an Appraisal 25 Years Later 383 Ulrich Bindseil and Philipp J Review of Keynesian Economics Volume 1 No. 4 2013 ELGAR JOURNALS Review of Keynesian Economics www.elgaronline.com/roke Print ISSN 2049-5323 Online ISSN 2049-5331 Annual subscription rates for 2014 (four issues) Institutions: £294/$473 (print and online) £257/$415 (online only) Individuals: £104/$168 (print and online) £68/$110 (online only) Students: £52.50/$84 (online only) Single print issue: £65/$100/€72 TO PLACE A SUBSCRIPTION (worldwide): The Subscriptions Dept Marston Book Services Ltd 160 Eastern Avenue Milton Park Abingdon Oxfordshire OX14 4SB UK Tel: +44 1235 465574 Fax: +44 1235 465556 Email: [email protected] Subscriptions in the EU may be subject to European VAT. If registered, please supply details to avoid unnecessary charges. Personal rate subscriptions are only available if payment is made by personal cheque or credit card, delivery is to a private address, and the journal is for personal use only. The online version is hosted on the ElgarOnline platform: www.elgaronline.com/roke For further information see www.e-elgar.com/roke or email [email protected] © Edward Elgar Publishing. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording or otherwise without the prior permission of the publisher. Permissions For permission to reproduce articles/information from the journal, please contact [email protected] Printed and bound in Great Britain by T.J. International Ltd, Padstow Elgar Journals Edward Elgar Publishing Ltd Edward Elgar Publishing, Inc The Lypiatts William Pratt House 15 Lansdown Road 9 Dewey Court Cheltenham Northampton Glos GL50 2JA Massachusetts 01060 UK USA Review of Keynesian Economics Volume 1, No. 4, Winter 2013 Contents Mini symposium: 25th anniversary of Basil Moore’s Horizontalism and Verticalism Basil J. Moore’s Horizontalists and Verticalists: an appraisal 25 years later 383 Ulrich Bindseil and Philipp J. König Horizontalists and verticalists after 25 years 391 James Culham and John E. King Horizontalists, verticalists, and structuralists: the theory of endogenous money reassessed 406 Thomas I. Palley Articles A heterodox structural Keynesian: honouring Augusto Graziani 425 Riccardo Bellofiore Keynes and the endogeneity of money 431 Fernando J. Cardim de Carvalho Degree of monopoly and class struggle: political aspects of Kalecki’s pricing and distribution theory 447 Fernando M. Rugitsky Book Reviews J. Kvist, J. Fritzell, B. Hvinden, and O. Kangas, Changing Social Equality: The Nordic Welfare Model in the 21st Century (The Policy Press, Bristol, UK 2012) 224 pp. J. Hoekstra, Divergence in European Welfare and Housing Systems (IOS Press, Amsterdam, The Netherlands 2010) 232 pp. 465 Reviewed by Nick Falvo iv Review of Keynesian Economics, Vol. 1 No. 4 William K. Tabb, The Restructuring of Capitalism in Our Time (Columbia University Press, New York, USA 2011) 352 pp. 469 Reviewed by Brandon McCoy Piero Ferri, Macroeconomics of Growth Cycles and Financial Instability (Edward Elgar, Cheltenham, UK and Northampton, USA 2011) 224 pp. 472 Reviewed by William McColloch Philip Mirowski, Never let a Serious Crisis go to Waste: How Neoliberalism Survived the Financial Meltdown (Verso, London, UK and New York, USA 2013) 480 pp. 476 Reviewed by John E. King Review of Keynesian Economics, Vol. 1 No. 4, Winter 2013, pp. 383–390 Basil J. Moore’s Horizontalists and Verticalists: an appraisal 25 years later Ulrich Bindseil* Directorate General Market Operations, European Central Bank, Frankfurt, Germany Philipp J. König* Department of Macroeconomics, Economic Policy and Forecasting, German Institute for Economic Research, Berlin, Germany In 1988 Basil Moore published his book Horizontalists and Verticalists: The Macroeconomics of Credit Money, which this year celebrates its 25th birthday. We discuss this book from today’s perspective, and in particular whether Moore’s main assertions have been validated or rejected by the development of central bank practice and academic monetary economics. We find that the book has impressively stood the test of time and, despite part of textbook economics still insisting on the money multiplier as an explanation for the money supply, it is not much of an exaggeration to say that we have all become ‘Horizontalists’ in the last 25 years. Keywords: monetary policy, interest rates JEL codes: E40, E50 1 INTRODUCTION A student of neoclassical Austrian Fritz Machlup, Basil Moore became interested in money and banking very early in his career. His thesis dealt with the effects of monetary policy on bank earnings. He spent his first sabbatical with John Gurley and Edward Shaw in Stanford who, in 1960, had written their influential monograph, Money in a Theory of Finance. In 1968, Moore himself published his first book, An Introduction to the Theory of Finance. As we point out below, we believe that it is, among other things, his deep interest in and firm knowledge of finance and banking issues that enabled Moore to develop what he later called the ‘horizontalist view of credit money’ (see Hein and Nichoij 2010). Under the influence of Paul Davidson, Moore began to develop his views on monetary macroeconomics, primarily as a response to the dominant paradigm of Friedman’s monetarism. This culminated in 1988 in his book, Horizontalists and Verticalists: The Macroeconomics of Credit Money, which this year celebrates its 25th birthday. We discuss this book from today’s perspective, and in particular whether Moore’s main assertions have been validated or rejected by the development of central * The views in this article are those of the authors and do not necessarily reflect those of their respective affiliations. © 2013 The Author Journal compilation © 2013 Edward Elgar Publishing Ltd The Lypiatts, 15 Lansdown Road, Cheltenham, Glos GL50 2JA, UK and The William Pratt House, 9 Dewey Court, Northampton MA 01060-3815, USA 384 Review of Keynesian Economics, Vol. 1 No. 4 bank practices and academic monetary economics. We find that the book has impress- ively stood the test of time and, despite part of textbook economics still insisting on the money multiplier as an explanation for the money supply, it is not much of an exaggera- tion to say that we have all become ‘Horizontalists’ in the last 25 years. 2 ‘VERTICAL’ VS ‘HORIZONTAL’ VIEWPOINTS The ‘verticalist’ view states that the money supply function is exogenous, is indepen- dent from money demand, and can, at least to a reasonable extent, be controlled by the central bank. The verticalist paradigm may apply in a world of commodity or pure fiat money. But, as Moore argued in 1988, it does not provide a correct description of a credit economy. Rather, in such a world, a ‘horizontalist’ view must be adopted. The supply of credit money is endogenous, is demand-determined, and only its price can be controlled by the central bank, not its quantity. This was Moore’s message in 1988 and it was a brave one. It postulated nothing less than the failure of a key assumption taken for granted by almost every monetary macro- economist in the twentieth century: that the central bank can control the monetary base and thereby exert control over the stock of money supplied to the economy. Moore was aware of the consequences of removing this central assumption and instead adopting the horizontal view. He did not shy away from explicitly spelling this out: The ‘Horizontalist’ notion … implies, for example, that the entire literature on monetary control and on monetary policy, IS-LM analysis, the Keynesian and the money multiplier, liquidity preference, interest rate determination, the influence of public sector deficits on the level of domestic interest rates, growth theory, and even the theory of inflation must be comprehen- sively reconsidered and rewritten. (Moore 1988, p. xiv) And he added self-confidently: virtually everything written in the monetary, macro- and growth literature – [is] either mis- specified or incomplete. Such fundamental theoretical misspecification renders all accompa- nying empirical parameter estimates highly suspect. (ibid., p. xiv) By providing the analytical and empirical foundation of the horizontalist view, Moore aimed at fundamentally reshaping monetary economics. 3 HOW SUCCESSFUL HAS MOORE BEEN? Moore’s ideas may have shaped the course of post-Keynesian economics. Although we have to admit that neither of us is much acquainted with the post-Keynesian literature, we believe that the Festschrift edited by Setterfield (2006) is evidence enough of Moore’s influence in this field of economics. However, mainstream monetary economics has largely ignored ‘Horizontalists and Verticalists,’ even though Niggle (1989) stressed that the book should have been ‘as influential within monetary economy and political economy as Keynes’s Tract on Mone- tary Reform, Treatise on Money,andGeneral Theory’ (p. 1181). We too do believe that Moore’s book rightly deserves its place in the history of economic thought. But we believe that this will take until mainstream (and in particular textbook) economics has freed itself completely from the assumption of an exogenous and controllable money stock that Moore identified to be so mistaken. © 2013 The Author Journal compilation © 2013 Edward Elgar Publishing Ltd Basil J. Moore’s Horizontalists and Verticalists: an appraisal 25 years later 385 The year 1988, in which Moore wrote, was, however, not ripe for his view. It was a time when mainstream monetary economics had already experienced fundamental changes that continue until today. Robert Lucas had issued his critique on econometric policy evaluation 12 years earlier and thereby triggered the avalanche of micro-based macroeconomics that still prevails today. The foundations for modern New Keynesian monetary models had been laid by Calvo (1983) or Blanchard and Kyotaki (1987). The movement of rational expectations economics was already in full swing. All these developments took place without taking note of the ‘horizontalist’ view. With respect to monetary issues, they firmly rested on the possibility that central banks can exert direct control over the monetary base.
Load more

Recommended publications
  • Forecasting the Money Multiplier: Implications for Money Stock Control and Economic Activity
    Forecasting the Money Multiplier: Implications for Money Stock Control and Economic Activity R. W. HAFER, SCOTT E. HUN and CLEMENS J. M. KOOL ONE approach to controlling money stock growth based on the technique of Kalman filtering.3 Although is to adjust the level of the monetary base conditional the Box-Jenkins type of model has been used in pre- on projections ofthe money multiplier. That is, given a vious studies toforecast the Ml multiplier, this study is desired level for next period’s money stock and a pre- the first to employ the Kalsnan filtering approach to diction of what the level of the money multiplier next tlae problen_i. period will be, the level of the adjusted baseneeded to The second purpose of this study is to rise the multi- achieve the desired money stock is determined re- plier forecasts in a simulation experiment that imple- sidually. For such a control procedure to function ments the money control procedure cited above. properly, the monetary authorities must be able to Given monthly money multiplier forecasts from each predict movements in the multiplier with some of the forecasting methods, along with predetermined, accuracy. a hypothetical Ml growth targets, monthly and quarter- This article focuses, first, oma the problem of predict- ly Ml growth rates are simulated for the 1980—82 ing moveanents in the multiplier. Two n_iodels’ capa- period. bilities in forecasting ti_ic Ml money multiplier from Finally, the importance of reduced volatility of the January 1980 to Decen_iber 1982 are compared. One quarterly Ml growtla is examined in another simula- procedure is based on the time series models of Box 2 tion experiment.
    [Show full text]
  • We Are All Horizontalists Now!« Interview with Basil Moore*,**
    Forum »We are all Horizontalists now!« Interview with Basil Moore*,** Basil, how did you come to economics? I was born in 1933, and so I am a product of the Great Depression of the thirties. My father had then lost his job and was selling apples on the street of Toronto. I was attracted to economics basically because I had heard so many stories about the depression, growing up as a boy in the 1930s. I was trying to fi gure out what had gone wrong and what we could do diff erently next time. Who were the economists that impressed you most? I was an undergraduate at Victoria College, University of Toronto, and had several good role models there. I then had to decide where to do my graduate work, and applied to eight diff erent universities. I was accepted at seven and I had to decide where to go. I was ac- cepted at Harvard, and sometimes I regret not going there, because it is the leading univer- sity in the States. But I went to John Hopkins University because they off ered me the larg- est fellowship. Hopkins was in its great years then, having Machlup, Kuznets and Domar as professors and Lerner and Patinkin as visitors. My doctoral supervisor was Fritz Machlup, a famous Austrian neoclassical micro- theorist. I am still kind of surprised about the topic I picked under Machlup: Th e Eff ects of Countercyclical Monetary Policy on the Earnings of Canadian Chartered Banks. My thesis was what we used to call a pot boiler, which is something to keep a chicken in the pot.
    [Show full text]
  • It's BAAACK! Japan's Slump and the Return of the Liquidity Trap
    IT’S BAAACK! JAPAN’S SLUMP AND THE RETURN OF THE LIQUIDITY TRAP In the early years of macroeconomics as a discipline, the liquidity trap - that awkward condition in which monetary policy loses its grip because the nominal interest rate is essentially zero, in which the quantity of money becomes irrelevant because money and bonds are essentially perfect substitutes - played a central role. Hicks (1937), in introducing both the IS-LM model and the liquidity trap, identified the assumption that monetary policy was ineffective, rather than the assumed downward inflexibility of prices, as the central difference between “Mr. Keynes and the classics”. It has often been pointed out that the Alice-in-Wonderland character of early Keynesianism, with its paradoxes of thrift, widow's cruses, and so on, depended on the explicit or implicit assumption of an accommodative monetary policy; it has less often been pointed out that in the late 1930s and early 1940s it seemed quite natural to assume that money was irrelevant at the margin. After all, at the end of the 30s interest rates were hard up against the zero constraint: the average rate on Treasury bills during 1940 was 0.014 percent. Since then, however, the liquidity trap has steadily receded both as a memory and as a subject of economic research. Partly this is because in the generally inflationary decades after World War II nominal interest rates stayed comfortably above zero, and central banks therefore no longer found themselves “pushing on a string”. Also, the experience of the 30s itself was reinterpreted, most notably by Friedman and Schwartz (1963); emphasizing broad aggregates rather than interest rates or monetary base, they argued in effect that the Depression was caused by monetary contraction, that the Fed could have prevented it, and implicitly that even after the great slump a sufficiently aggressive monetary expansion could have reversed it.
    [Show full text]
  • Money Creation in the Modern Economy
    14 Quarterly Bulletin 2014 Q1 Money creation in the modern economy By Michael McLeay, Amar Radia and Ryland Thomas of the Bank’s Monetary Analysis Directorate.(1) This article explains how the majority of money in the modern economy is created by commercial banks making loans. Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits. The amount of money created in the economy ultimately depends on the monetary policy of the central bank. In normal times, this is carried out by setting interest rates. The central bank can also affect the amount of money directly through purchasing assets or ‘quantitative easing’. Overview In the modern economy, most money takes the form of bank low and stable inflation. In normal times, the Bank of deposits. But how those bank deposits are created is often England implements monetary policy by setting the interest misunderstood: the principal way is through commercial rate on central bank reserves. This then influences a range of banks making loans. Whenever a bank makes a loan, it interest rates in the economy, including those on bank loans. simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money. In exceptional circumstances, when interest rates are at their effective lower bound, money creation and spending in the The reality of how money is created today differs from the economy may still be too low to be consistent with the description found in some economics textbooks: central bank’s monetary policy objectives.
    [Show full text]
  • Harvard Kennedy School Mossavar-Rahmani Center for Business and Government Study Group, February 28, 2019
    1 Harvard Kennedy School Mossavar-Rahmani Center for Business and Government Study Group, February 28, 2019 MMT (Modern Monetary Theory): What Is It and Can It Help? Paul Sheard, M-RCBG Senior Fellow, Harvard Kennedy School ([email protected]) What Is It? MMT is an approach to understanding/analyzing monetary and fiscal operations, and their economic and economic policy implications, that focuses on the fact that governments create money when they run a budget deficit (so they do not have to borrow in order to spend and cannot “run out” of money) and that pays close attention to the balance sheet mechanics of monetary and fiscal operations. Can It Help? Yes, because at a time in which the developed world appears to be “running out” of conventional monetary and fiscal policy ammunition, MMT casts a more optimistic and less constraining light on the ability of governments to stimulate aggregate demand and prevent deflation. Adopting an MMT lens, rather than being blinkered by the current conceptual and institutional orthodoxy, provides a much easier segue into the coordination of monetary and fiscal policy responses that will be needed in the next major economic downturn. Some context and background: - The current macroeconomic policy framework is based on a clear distinction between monetary and fiscal policy and assigns the primary role for “macroeconomic stabilization” (full employment and price stability and latterly usually financial stability) to an independent, technocratic central bank, which uses a “flexible inflation-targeting” framework. - Ten years after the Global Financial Crisis and Great Recession, major central banks are far from having been able to re-stock their monetary policy “ammunition,” government debt levels are high, and there is much hand- wringing about central banks being “the only game in town” and concern about how, from this starting point, central banks and fiscal authorities will be able to cope with another serious downturn.
    [Show full text]
  • Assessing the Stability and Predictability of the Money Multiplier in the EAC
    Working paper Assessing the Stability and Predictability of the Money Multiplier in the EAC The Case of Tanzania Christopher Adam Pantaleo Kessy May 2011 When citing this paper, please use the title and the following reference number: S-40021-TZA-1 Assessing the stability and predictability of the money multiplier in the EAC: The Case of Tanzania This paper was commissioned by the Economic Affairs sub-committee of the East African Community Monetary Affairs Committee. The paper offers a template for Partner State central banks to employ in developing common operational and analytical approaches to understanding the evolution and behaviour of the money multiplier in the context of reserve money-based monetary programmes. The paper is the outcome of research collaboration between staff of the Bank of Tanzania and the International Growth Centre. The views expressed in this paper are solely those of the authors and do not necessarily reflect the official views of the Bank of Tanzania or its management. We are grateful to members of the Sub-Committee for useful comments. All errors are those of the authors. Contents Introduction 3 Defining the money multiplier X Tanzania: evidence and interpretation X Forecast performance X Summary and conclusion X References X Appendix I: Data X Appendix II X 2 Assessing the stability and predictability of the money multiplier in the EAC: The Case of Tanzania Introduction This paper discusses the stability and predictability of the money multiplier in the context of a reserve money anchor for inflation. The methods are illustrated throughout using data from Tanzania, but the discussion is relevant for the whole of the East African Community.
    [Show full text]
  • The Monetary Economics of Basil J. Moore
    Mark Setterfield Editorial to the special issue: The monetary economics of Basil J. Moore March 2020 Working Paper 02/2020 Department of Economics The New School for Social Research The views expressed herein are those of the author(s) and do not necessarily reflect the views of the New School for Social Research. © 2020 by Mark Setterfield. All rights reserved. Short sections of text may be quoted without explicit permission provided that full credit is given to the source. Editorial to the special issue: The monetary economics of Basil J. Moore Mark Setterfield∗ March 23, 2020 Born in Toronto in 1933, Basil J. Moore (1933 – 2018) studied at the University of Toronto and Johns Hopkins University in Baltimore, where his doctoral research – on the impact of monetary policy on bank profits in Canada – was supervised by Fritz Machlup. He joined the faculty at Wesleyan University in Connecticut in the late 1950s, spending more than four decades of his career at Wesleyan before accepting a position as Professor Extraordinary of Economics at the University of Stellenbosch in South Africa in 2003. A monetary-macroeconomist who increasingly identified with Post-Keynesian economics as his career progressed, Moore is renowned as an advocate of endogenous money theory (EMT) and, in particular, the variant of EMT that he dubbed ‘horizontalism’. The core tenets of his thinking on endogenous money and its macroeconomic consequences are found in a series of articles and books published during the second half of his career. Many of these are well known in both academic and policy-making circles – none more so than Horizontalists and Verticalists: The Macroeconomics of Credit Money (Moore, 1988) which is, by popular repute, his magnum opus (see, for example, Bindseil and K¨onig (2013)).
    [Show full text]
  • Endogenous Money: Implications for the Money Supply Process, Interest Rates, and Macroeconomics
    RESEARCH INSTITUTE POLITICAL ECONOMY Endogenous Money: Implications for the Money Supply Process, Interest Rates, and Macroeconomics Thomas Palley August 2008 Gordon Hall 418 North Pleasant Street Amherst, MA 01002 Phone: 413.545.6355 Fax: 413.577.0261 [email protected] www.peri.umass.edu WORKINGPAPER SERIES Number 178 Endogenous Money: Implications for the Money Supply Process, Interest Rates, and Macroeconomics Abstract Endogenous money represents a mainstay of Post Keynesian (PK) macroeconomics. Analytically, it provides a critical linkage between the financial and real sectors, with the link running predominantly from credit to money to economic activity. The important feature is credit is placed at the beginning of this sequence, which contrasts with conventional representations that place money first. The origins of PK endogenous money lie in opposition to monetarism. Whereas neo-Keynesian economics challenged monetarism by focusing on the optimality of money supply versus interest rate targets, PK theory challenged monetarism’s description of the money supply process. PK theory is itself divided between “horizontalist” and “structuralist” approaches to the money supply. Horizontalists believe the behavior of financial institutions is unconstrained by the availability of liquidity (reserves) provided by the central bank and the supply-price of finance to banks is fixed at a price set by the central bank. Structuralists believe liquidity pressures matter and the supply price of finance to banks can increase endogenously. Horizontalists can be further sub-divided into “strong” and “weak” positions. The strong position holds the bank loan supply schedule is horizontal and interest rates are unaffected by lending. The weak position holds that interest rates may rise with lending if borrower quality deteriorates.
    [Show full text]
  • The Friedman-Eichengreen Theory of the Great Depression
    THE FRIEDMAN-EICHENGREEN THEORY OF THE GREAT DEPRESSION Paul Krugman March 28, 2009 This note is an attempt, for teaching purposes, to clarify my own thoughts about Barry Eichengreen’s interpretation of the international spread of the Great Depression. As I interpret it, Eichengreen’s story of what happened to the relationship between gold and monetary base at the international level closely resembles Friedman and Schwartz’s story about what happened to the relationship between monetary base and broader monetary aggregates at the domestic level. So one can write down an integrated Friedman-Eichengreen theory of the Depression. One can also ask whether this theory looks right. I’ve expressed some doubts about the Friedman explanation of the US Depression; by extension, one has to worry about how well the international extension of that explanation works. So here goes. I imagine a world of two countries, Home and Foreign, each producing a distinct good. Effective demand for each country’s good, which determines real output, is a function of its own output (via consumer demand), foreign output, the real exchange rate, and the interest rate: y = A(y, y*, EP*/P, i) y* = A*(y*,y, EP*/P, i*) I assume interest arbitrage: i = i* In each country there is a demand for money: M/P = L(y,i) M*/P* = L*(y*,i*) Now, assume prices fixed in the short run (Eichengreen and Sachs, more realistically for the 30s, had upward-sloping AS curves, but it doesn’t matter for current purposes). In each country the money supply is determined via a multiplier by the monetary base: M = μB, M* = μ*B* And now for the gold-exchange standard thing: each country pegs its currency to gold at rates R, R* currency units per ounce, so that E= R/R*.
    [Show full text]
  • Post Keynesian Approach
    _____________________________________________________________________________________________________________ Ömer Halisdemir Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi Yıl: 2020 Cilt-Sayı: 13(4) ss: 824-839 Academic Review of Economics and Administrative Sciences Year: 2020 Vol-Issue: 13(4) pp: 824-839 http://dergipark.org.tr/tr/pub/ohuiibf/ ISSN: 2564-6931 Araştırma Makalesi DOI: 10.25287/ohUiibf.735910 Research Article Geliş Tarihi / Received: 12.05.2020 KabUl Tarihi / Accepted: 09.07.2020 _____________________________________________________________________________________________________________ THE ORIGIN OF THE MONEY, ENDOGENEITY OF MONEY SUPPLY AND BALANCE OF PAYMENTS: POST KEYNESIAN APPROACH Yelda Bugay TEKGÜL1 Abstract Discussions about the origin of the money object are represented in two separate streams as orthodox and heterodox. Orthodox flow is expressed as a Metallist approach while looking at money as a means of exchange, heterodox flow is called Cartalist and emphasizes the phenomenon of authority in the object defined as money. Orthodox current sees the money supply as an inventory and external variable that can be increased and decreased by the central bank (CB) according to the money holding preferences of the people and money is demanded only for transaction purposes. The Mundell-Fleming Model (MFM), which is included in this flow and adds the balance of payments to analysis, accepts the money supply only endogenously in the fixed exchange rate system. The aim of this study is to explain the endogenity of money supply in an open economy within the framework of Post Keynesian economics (PKI), which is based on the fact that the investment and production process takes place in a purely monetary economy. In this framework, compensation thesis which provides an alternative explanation for open economies has brought about a new expansion that is completely different from the MFM.
    [Show full text]
  • Horizontalists, Verticalists, and Structuralists: the Theory of Endogenous Money Reassessed
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Palley, Thomas I. Working Paper Horizontalists, verticalists, and structuralists: The theory of endogenous money reassessed IMK Working Paper, No. 121 Provided in Cooperation with: Macroeconomic Policy Institute (IMK) at the Hans Boeckler Foundation Suggested Citation: Palley, Thomas I. (2013) : Horizontalists, verticalists, and structuralists: The theory of endogenous money reassessed, IMK Working Paper, No. 121, Hans-Böckler-Stiftung, Institut für Makroökonomie und Konjunkturforschung (IMK), Düsseldorf, http://nbn-resolving.de/urn:nbn:de:101:1-201403119904 This Version is available at: http://hdl.handle.net/10419/105987 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu June 2013 121 Institut für Makroökonomie und Konjunkturforschung Macroeconomic Policy Institute Working Paper Thomas I.
    [Show full text]
  • The Monetary and Fiscal Nexus of Neo-Chartalism: a Friendly Critique
    JOURNAL OF ECONOMIC ISSUES Vol. XLVII No. 1 March 2013 DOI 10.2753/JEI0021-3624470101 The Monetary and Fiscal Nexus of Neo-Chartalism: A Friendly Critique Marc Lavoie Abstract: A number of post-Keynesian authors, called the neo-chartalists, have argued that the government does not face a budget constraint similar to that of households and that government with sovereign currencies run no risk of default, even with high debt-to-GDP ratio. This stands in contrast to countries in the eurozone, where the central bank does not normally purchase sovereign debt. While these claims now seem to be accepted by some economists, neo-chartalists have also made a number of controversial claims, including that the government spends simply by crediting a private-sector-bank account at the central bank; that the government does need to borrow to deficit-spend; and that taxes do not finance government expenditures. This paper shows that these surprising statements do have some logic, once one assumes the consolidation of the government sector and the central bank into a unique entity, the state. The paper further argues, however, that these paradoxical claims end up being counter-productive since consolidation is counter-factual. Keywords: central bank, clearing and settlement system, eurozone, neo-chartalism JEL Classification Codes: B5, E5, E63 The global financial crisis has exposed the weaknesses of mainstream economics and it has given a boost to heterodox theories, in particular, Keynesian theories. The mainstream view about the irrelevance of fiscal activism has been strongly criticized by the active use of fiscal policy in the midst of the global financial crisis.
    [Show full text]