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A Post‐Keynesian Stock‐Flow Consistent Model For Dynamic Analysis Of Monetary Policy Shock On Banking Behaviour

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  • Edwin Le Heron
  • Tarik Mouakil

Abstract

We try to make Keynes' approach compatible with an endogenous theory of the money supply. For that purpose, the principle of liquidity preference is generalized within a competitive banking framework. Private banks can impose a monetary rationing independently of the central bank. Then, we analyse the consequences of a monetary policy shock on the financial behaviour of banks. We clarify the dynamic process between the monetary policy and net investment within a Minskyan approach. First, we build a Post‐Keynesian stock‐flow consistent model with a private‐bank sector introducing more realistic features. Second, we perform some simulations.

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  • Edwin Le Heron & Tarik Mouakil, 2008. "A Post‐Keynesian Stock‐Flow Consistent Model For Dynamic Analysis Of Monetary Policy Shock On Banking Behaviour," Metroeconomica, Wiley Blackwell, vol. 59(3), pages 405-440, July.
    • Handle: RePEc:bla:metroe:v:59:y:2008:i:3:p:405-440
    DOI: 10.1111/j.1467-999X.2008.00313.x
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    References listed on IDEAS

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    1. J. Tobin, 1958. "Liquidity Preference as Behavior Towards Risk," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 25(2), pages 65-86.
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    7. Marc Lavoie & Wynne Godley, 2012. "Kaleckian Models of Growth in a Coherent Stock–Flow Monetary Framework: A Kaldorian View," Palgrave Macmillan Books, in: Marc Lavoie & Gennaro Zezza (ed.), The Stock-Flow Consistent Approach, chapter 6, pages 123-156, Palgrave Macmillan.
    8. Bernanke, Ben S & Blinder, Alan S, 1988. "Credit, Money, and Aggregate Demand," American Economic Review, American Economic Association, vol. 78(2), pages 435-439, May.
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    10. Edwin Le Heron, 2007. "The Dynamic Analysis of Monetary Policy Shock on Banking Behaviour," Palgrave Macmillan Books, in: John McCombie & Carlos Rodríguez González (ed.), Issues in Finance and Monetary Policy, chapter 5, pages 73-99, Palgrave Macmillan.
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