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 15: The rate of interest as a macroeconomic distribution parameter: horizontalism and post-Keynesian models of distribution and growth

Eckhard Hein

Abstract

This chapter reviews the main arguments put forward against the horizontalist view of endogenous credit and money and an exogenous rate of interest under the control of monetary policies. It argues that the structuralist arguments put forward in favour of an endogenously increasing interest rate when investment and economic activity are rising, owing to increasing indebtedness of the firm sector or decreasing liquidity in the commercial-bank sector, raise major doubts from a macroeconomic perspective. This is shown by means of examining the effect of increasing capital accumulation on the debt–capital ratio of the firm sector in a simple Kaleckian distribution and growth model.

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