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 6: Liquidity, finance and economic growth: some unresolved issues for developing economies

Noemi Levy-Orlik

Abstract

The assumption that money can disturb economic activity has gained consensus across different schools of economic thought, but there remain differences in terms of the channels through which this occurs. Many economists consider that central banks can only set their rate of interest and are unable to control the money supply, thereby debt originates money, which has become structurally endogenous. This chapter analyses different heterodox approaches, highlighting the discussion on money creation and destruction, and explaining how this applies to developing economies, where demand for investment expenditure is limited and exchange rates have become increasingly important. The analysis focuses on the Mexican economy in the 1980–2007 period, just before the global financial crisis burst.

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