Advances in Endogenous Money Analysis
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Advances in Endogenous Money Analysis

Edited by Louis-Philippe Rochon and Sergio Rossi

The endogenous nature of money is a fact that has been recognized rather late in monetary economics. Today, it is explained most comprehensively by the theory of money in post-Keynesian monetary theory. The expert contributors to this enlightening book revisit long-standing debates on the endogeneity of money from the position of both horizontalists and structuralists, and prescribe new areas of research and debate for post-Keynesian scholars to explore.
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Chapter 4: Money and interest-rate determination in a system with no reserve requirements

Sergio Rossi


This chapter clarifies different points that are the backbone of the debate between horizontalists and structuralists. It first draws a clear-cut distinction between money and bank deposits in order to set the record straight as regards the working of a single-bank system. It then elaborates on the role of the central bank in a multi-bank system, to show that even central-bank money is always and everywhere an endogenous phenomenon, owing to the need of a means of final payment on the interbank market. On these grounds, it explains a central bank’s interest-rate determination, referring to the Canadian case, which is a very efficient system for interest-rate control.

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