Transcending the new macroeconomic orthodoxy in the Eurozone: a Post-Keynesian view

Kristijan Kotarski () and Milan Deskar-Škrbiæ ()
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Kristijan Kotarski: Faculty of Political Science, University of Zagreb, Zagreb, Croatia.
Milan Deskar-Škrbiæ: Erste&Steiermarkische bank d.d., Zagreb, Croatia

Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, 2016, vol. 34, issue 2, 419-441

Abstract: The main aim of this paper is to empirically test the endogenous money hypothesis for the Eurozone. Based on data on loans to private sector, deposits, monetary aggregates, prices and GDP we use three empirical approaches to test the hypothesis: (i) moving correlation; (ii) Granger causality tests and (iii) original framework for the analysis based on the structural VAR model. The empirical results confirm our main hypothesis on the endogeneity of money in the Eurozone as they show that the commonly accepted neoclassical relations between monetary variables, inflation and economic activity are reversed in case of Eurozone and that the direction of influence goes from loans to deposits and from real sector of the economy towards the monetary sector. The basic conclusion from carried out research is that ECB should implement measures directly aimed at stimulation of domestic demand (monetary-supported tax cut).

Keywords: macroeconomic orthodoxy; eurozone; post-Keynesian approach; endogenous money; ECB (search for similar items in EconPapers)
JEL-codes: B52 C01 E12 E51 E52 F34 F50 G01 G20 P48 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:rfe:zbefri:v:34:y:2016:i:2:p:419-441

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