A POST-KEYNESIAN STOCK-FLOW CONSISTENT MODEL FOR DYNAMIC ANALYSIS OF MONETARY POLICY SHOCK ON BANKING BEHAVIOUR

Edwin Le Heron and Tarik Mouakil

Metroeconomica, 2008, vol. 59, issue 3, pages 405-440

Abstract: We try to make Keynes' approach compatible with an endogenous theory of the money supply. For that purpose, the principle of liquidity preference is generalized within a competitive banking framework. Private banks can impose a monetary rationing independently of the central bank. Then, we analyse the consequences of a monetary policy shock on the financial behaviour of banks. We clarify the dynamic process between the monetary policy and net investment within a Minskyan approach. First, we build a Post-Keynesian stock-flow consistent model with a private-bank sector introducing more realistic features. Second, we perform some simulations. Copyright © 2008 The Authors. Journal compilation © 2008 Blackwell Publishing Ltd.

Date: 2008

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