Beyond Endogenous Money: Toward Endogenous Finance

Abstract

Post Keynesian economists have long been interested in the endogenous nature of finance. However, formal interest has thus far been largely restricted to the money supply implications of the banking sector’s ability to accommodate expansions of loan demand. This exclusive concern with ‘endogenous money’ can be viewed as a residue from classical monetarism, in which only money matters, and in which money supply fluctuations cause the business cycle. This chapter seeks to broaden the Post Keynesian approach so as to include forms of credit other than just bank loans. In doing so, it transcends the monetarist parameterization of monetary theory, and begins the process of exploring the implications of what may be termed ‘endogenous finance’.