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 5: New insights on the money-supply-endogeneity debate and the new ‘equity’ multiplier: some evidence from the euro area

Yannis Panagopoulos and Aristotelis Spiliotis


This chapter extends the horizontalist–structuralist debate about the money-supply process, taking into consideration the restrictions that emerged during the Basel III agreements. A two-step approach is proposed: first, the existence of a new ‘equity credit multiplier’ is examined, that is, the importance of banks’ equity in their lending process. Then, this ‘equity effect’ is embedded into a multivariate loan model. By applying this two-step approach to the euro area, the chapter concludes that there are strong empirical indications of money endogeneity in the system with a reversed ‘equity credit multiplier’.

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