 Endogenous money: a credit and state money approachL. Randall Wray () Chapter 6 in Understanding Modern Money Theory, 2025, pp 122-147 from Edward Elgar Publishing Abstract: This chapter focuses on the revival of the endogenous money approach in the postwar period, beginning with Kaldor and the Radcliffe Committee. They argued that even if the government could control the money supply, this would not effectively limit spending because the velocity of money could rise without limit. By the 1970s, Kaldor and his followers (including Post Keynesians, as well as the Franco-Italian circuitistes) adopted the stronger argument that central banks cannot control the money supply. Bank lending is limited only by banks’ willingness to lend and their ability to find credit-worthy borrowers. The causal relation between reserves and the money supply is reversed: the quantity of money determines the reserves as central banks accommodate demand to hit interest rate targets. By the 1990s, even the mainstream accepted these arguments, and central banks formally announced the targets. As this chapter will demonstrate, MMT integrates endogenous money with its credit and state theory of money. Keywords: Endogenous money; Exogenous money; Horizontalism; Central bank accommodation; Interest rate targets; Money or deposit multiplier; Velocity; Circuitiste; Credit money; State money (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:elg:eechap:20168_6 Ordering information: This item can be ordered from Access Statistics for this chapter More chapters in Chapters from Edward Elgar Publishing |
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