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Jane Knodell

Post-Keynesians disagree about whether money is intrinsically endogenous, or whether it has become endogenous over time with the emergence of modern central banking. In this chapter, monetary history and institutional analysis are brought to bear on the issue. The chapter examines two early monetary systems that lacked central banks: metallic money in fifteenth- to seventeenth-century western Europe, and paper money in eighteenth-century Britain and British North America. These systems are found to have been imperfectly endogenous, owing to inadequacies in their mechanics of supply. Furthermore, endogeneity did not evolve in an unremittingly forward path historically, as the literature suggests: in some respects, metallic-money systems were more flexible than paper-money systems.

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Louis-Philippe Rochon and Sergio Rossi

What precisely is endogenous money? Does the central bank always accommodate banks’ demand for central-bank money? Does it have the ability to increase the money supply exogenously? Can it really have the rate of interest of its choice? Has money always been endogenous or has it become endogenous through time with the advent of certain institutions? This volume shows that a proper understanding of money is still required, and that the institutional actions of central banks reveal how recent so-called unconventional policies are doomed to fail. Revisiting the fundamental elements of the theory of endogenous money leads to completely different sets of monetary policy recommendations.

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Edited by Louis-Philippe Rochon and Sergio Rossi

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Sherrill Shaffer and Laura Spierdijk

Decades of theoretical and empirical research have contributed numerous ways to measure competition and to compare the competitive impact of alternate regulatory policies and market environments. Several of the most convenient measures, unfortunately, are beset by very serious problems, while none are completely ideal. Faced with an ongoing and undiminished need to assess competition and market power nonetheless, we would advocate a focus on the scant handful of “least objectionable” measures. Among these, the Lerner index and the Rothschild–Bresnahan conduct index together provide complementary, well-established, easily understood measures that relate to policy-relevant aspects of market power according to formal underlying theoretical models of firms and industries. The latter approach is slightly more demanding with regard to data and estimation techniques, requiring nonlinear systems estimation except in a correlation version under additional assumptions; one tradeoff is that the correlation version yields only qualitative (rather than quantitative) conclusions about market power.

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Jacob A. Bikker and Laura Spierdijk

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The crude oil market and its driving forces

Prices, Production and Consumption

Basil Oberholzer

This chapter is an introduction to the most important topics regarding the crude oil market. Several data and facts of the market are briefly presented. An outstanding feature of crude oil at the core of public debates is its character as a fossil and non-renewable fuel. The chapter enlightens what this means in economic terms and how it is connected to the investigation at hand. As another issue, recent research on the oil market has, to a great part, focused on the driving forces of the oil price. In particular, our interest is in the question of whether economic fundamentals are the only factors influencing the price or whether speculation may also be effective. Finally, the role of OPEC and its potential power to impact on the oil market is considered.

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Tim Congdon

Most analyses of the Great Recession have blamed it on weaknesses of banking systems, notably excessive losses and a lack of capital. However, this mainstream approach is far from convincing, as most banks had higher capital/asset ratios ahead of the crisis than on average in recent decades. An alternative argument – that the falls in asset prices and slump in demand were due to a crash in the rate of money growth – is proposed, and is shown to be applicable to the main countries.

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Tim Congdon

The introduction explains why the Quantity Theory of Money is relevant to understanding the causes of the Great Recession of 2008 and 2009, just as it was relevant to understanding the causes of the USA’s Great Depression of 1929–33.

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Foreword

Did a Crash in Money Growth Cause the Global Slump?

Edited by Tim Congdon

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A brief description of the crisis

The Responsibility of Economists for the Great Recession

Giancarlo Bertocco

This chapter briefly describes the key characteristics of the contemporary crisis. The first characteristic is related to the place where it originated. The second concerns the phenomenon that triggered the crisis, that is, the substantial increase in delinquencies in a specific category of residential mortgages, namely, the so-called subprime mortgages. The third characteristic had to do with the evolution of the crisis since 2007.