Advances in the Post-Keynesian Analysis of Money and Finance

Abstract

This chapter focuses on the various monetary themes that have been emphasized by post-Keynesian economists and that turned out to have been validated by the events that occurred during and after the subprime financial crisis. These include interest rate targeting by the central bank, interest rate spreads, endogenous money, the reversed causality between reserves and money, the defensive role of central banks, the links between the central bank and the government, banks as very special financial institutions, the different role of the shadow banking system, and whether there are limits to the amounts of credit that banks can create. The chapter analyses unconventional monetary policies, including quantitative easing (QE), QE for the people and 100 per cent reserves. It also discusses the consequences, for the theory of endogenous central bank money, of the adoption of a system where the target interest rate is the interest rate on reserves.