It is not la vie en rose. New insights from Graziani’s theory of monetary circuit

Marco Veronese Passarella

No PKWP2209, Working Papers from Post Keynesian Economics Society (PKES)

Abstract: The aim of this paper is twofold. First, it shows how a standard stock-flow consistent model (SFCM) can be modified to embed some fundamental insights from Graziani’s theory of monetary circuit (TMC). Second, it aims at addressing some common mis- conceptions about the TMC. More precisely, it is argued that: a) a market-clearing price mechanism does not necessarily imply a neoclassical-like closure of the model; b) the ways in which SFCMs and the TMC define bank loans are mutually consistent, although they are based on different accounting periods; c) consumer credit is final finance, not initial finance; d) the paradox of profit is not a logical conundrum, but an abstract counterfactual that allows shedding light on a neglected role of government spending; e) overall, the TMC can be regarded as a “Marxian” rendition of Keynes’s method of aggregates.

Keywords: Theory of Monetary Circuit; Stock-Flow Consistent Models; Macroeconomics; Monetary Economics (search for similar items in EconPapers)
JEL-codes: E11 E12 E16 E17 (search for similar items in EconPapers)
Pages: 23
Date: 2022-03
New Economics Papers: this item is included in nep-acc, nep-ban, nep-hme, nep-mac and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:pke:wpaper:pkwp2209

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