Horizontalists, verticalists, and structuralists: The theory of endogenous money reassessed

Thomas I. Palley
IMK - Institut für Makroökonomie und Konjunkturforschung, Hans-Böckler-Stiftung, 2013
Level: schwer
Perspektiven: Institutionenökonomik, Postkeynesianismus
Thema: Institutionen, Regierungen & Politik, Makroökonomik, Geld & Schulden
Format: Working Paper
Link: https://www.imk-boeckler.de/de/faust-detail.htm?sync_id=6810

Exploring Economics Working Paper Selection

We collect and republish selected Working Papers and Journal Articles on Exploring Economics.

Learn more

Horizontalists, verticalists, and structuralists: The theory of endogenous money reassessed

Thomas I. Palley | 2013 | IMK Working Paper no. 121

 

Abstract: This paper uses the occasion of the twenty-fifth anniversary of Basil Moore’s book, Horizontalists and Verticalists, to reassess the theory of endogenous money. The paper distinguishes between horizontalists, verticalists, and structuralists. It argues Moore’s horizontalist representation of endogenous money was an over-simplification that discarded important enduring insights from monetary theory. The structuralist approach to endogenous money retains the basic insight that the money supply is credit driven but remedies horizontalism’s omissions and over-simplifications. Twenty-five years later, horizontalism has largely morphed into structuralism. The theoretical challenge going forward is to develop the role of money and finance in a Keynesian theory of output determination. As regards monetary policy, the challenge is how to conduct policy in a world of endogenous money. These concerns emanate naturally from a structuralist perspective on endogenous money.

Editors' note: We would like to thank Thomas Palley for permitting his paper to be made available on our site.

Read here

 

Stay tuned!

Subscribe to our newsletter to learn about new debates, conferences and writing workshops.

Subscribe!

Comment from our editors:

This paper is a masterly overview of the theory of endogenous money, its origins, various trains of thought, and implications for macroeconomic theory. With monetary theory arguably constituting the core of the dispute between the neoclassical school of economic thought and thus its modern-day cousin, the New Keynesian analytical framework on the one hand and the (Post-)Keynesian school on the other, Palley's paper is a superb introduction into heterodox economic thinking.

Go to: Horizontalists, verticalists, and structuralists: The theory of endogenous money reassessed

This material has been suggested and edited by:

Jakob Steffen
Tags: banking theory | credit view | currency theory | endogenous money | horizontalism | monetarism | money | Postkeynesianism | Working Paper
South Africa’s taxi industry was established by black people in the 1930s and has faced numerous challenges, including those posed by decades of apartheid laws. Covid-19 has highlighted contemporary challenges facing the industry and has also raised questions about how it can keep ‘driving forward’. This podcast explores questions such as what changes need to be made, and who can be the ‘drivers’ of such change.
2021
Level: mittel
Driving Forward Social and Solidarity Economy: The Case of South Africa's Taxi Industry
Maria Fustic, Georgia Pagiavla, Paloma Chuquín Alarcón, Jing-Syuan Wong, Georgia Pagiavla, Paloma Chuquín Alarcón, Jing-Syuan Wong
Exploring Economics
Banking 101 is a series of 6 short videos that ask the following questions: How do banks work and how is money created? Is reveals common misunderstandings of money creation and the role of banks. Furthermore, the videos show how models taught in many introductory classes to economics (Econ 101) do not reflect those processes: Part 1) “Misconceptions around Banking” questions common comprehensions of how banks work (savings = investments). Part 2) “What's wrong with the money multiplier” states that the model of the money multiplies is inaccurate. Part 3) “How is money really made by banks” explains the process of money creation, loans and inter-bank settlement. Part 4) “How much money banks create?” asks what limits the money creation by banks and presents the difference between reserve ratio, liquidity ration, equity and refers to the inter-bank market. Part 5) Explores the question if banks create money or just credit and especially refers to credit risks. Part 6) Explains how money gets destroyed when loans are paid back. Note: The videos refer to the UK monetary and banking system, some explanations don't apply to other banking systems, e.g. the reserve ratio.
2012
Level: leicht
How is money really made by banks? - Banking 101 (Part 3 of 6)
 
Positive Money
A detailed introduction into dependency theory that rethinks its relevance to modern development challenges.
2020
Level: leicht
Dependency Theory and Uneven Development
Ingrid Kvangraven
Crash Course Economics
This article investigates the set up of the CFA franc zones, its ties to French neocolonialism and its ability to further breed dependency in the former colonies.
2018
Level: leicht
The CFA Franc Zones: Neocolonialism and Dependency
Mariamawit Tadesse
Economic Questions
Was ist Inflation? Warum ist sie relevant? Und gibt es eine einheitliche Theorie über ihre Wurzeln und Ursachen, oder ist sie ein umstrittenes Konzept? Genau darum geht es in diesem Text: Wir definieren, was Inflation eigentlich bedeutet, bevor wir uns mit einem interdisziplinären und pluralistischen Ansatz in die theoretische Debatte stürzen: Wie entsteht sie, welche Faktoren können sie beeinflussen, und was kann man dagegen tun?
2022
Level: leicht
Inflation
Barta, Gerrard, Steffen & Zaspel
Exploring Economics

Spenden

Um sich weiterhin für Pluralismus und Vielfalt in der Ökonomik einzusetzen, benötigt das Netzwerk Plurale Ökonomik e.V. Unterstützung von Leuten wie dir. Deshalb freuen wir uns sehr über eine einmalige oder dauerhafte Spende.

Spenden