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On exogenous money and bank behaviour: the Pandora's box kept shut in Keynes' theory of liquidity preference?

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  • Jorg Bibow

Abstract

This essay examines Keynes' views on banking behaviour and the relationships between central banks and banks as they evolved from his Tract on Monetary Reform to The General Theory. The objective is to clarify in what sense money may be exogenous in his final work. We identify a distinctly Keynesian position on the money-supply process, featuring money exogeneity due to bank behaviour. Our findings run counter to both neoclassical synthesis view on exogenous money cum passive banks as well as the post Keynesian challenge of endogenous money cum passive banks.

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  • Jorg Bibow, 2000. "On exogenous money and bank behaviour: the Pandora's box kept shut in Keynes' theory of liquidity preference?," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 7(4), pages 532-568.
    • Handle: RePEc:taf:eujhet:v:7:y:2000:i:4:p:532-568
    DOI: 10.1080/09672560050210106
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    References listed on IDEAS

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    1. Bibow, Jorg, 2001. "The Loanable Funds Fallacy: Exercises in the Analysis of Disequilibrium," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 25(5), pages 591-616, September.
    2. Milton Friedman & Anna J. Schwartz, 1982. "Monetary Trends in the United States and United Kingdom: Their Relation to Income, Prices, and Interest Rates, 1867–1975," NBER Books, National Bureau of Economic Research, Inc, number frie82-2, January.
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    4. Bibow, Jorg, 1998. "On Keynesian Theories of Liquidity Preference," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(2), pages 238-273, March.
    5. Cottrell, Allin, 1994. "Post-Keynesian Monetary Economics," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 18(6), pages 587-605, December.
    6. L. R. Wray, 1990. "Money and Credit in Capitalist Economies," Books, Edward Elgar Publishing, number 474.
    7. Dow, Sheila C, 1996. "Horizontalism: A Critique," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 20(4), pages 497-508, July.
    8. J. M. Keynes, 1937. "The General Theory of Employment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 51(2), pages 209-223.
    9. Lavoie, Marc, 1996. "Horizontalism, Structuralism, Liquidity Preference and the Principle of Increasing Risk," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(3), pages 275-300, August.
    10. Gary A. Dymski, 1988. "A Keynesian Theory of Bank Behavior," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 10(4), pages 499-526, July.
    11. Alan Greenspan, 2005. "Chairman's remarks," Review, Federal Reserve Bank of St. Louis, vol. 87(Mar), pages 137-138.
    12. Bruce Greenwald & Joseph E. Stiglitz, 1993. "New and Old Keynesians," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 23-44, Winter.
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    Cited by:

    1. Jorg Bibow, "undated". "Easy Money Through The Back Door: The Markets Vs. The ECB," Economics Public Policy Brief Archive ppb_65, Levy Economics Institute.
    2. Joerg Bibow, 2005. "Liquidity Preference Theory Revisited—To Ditch or to Build on It?," Method and Hist of Econ Thought 0508003, University Library of Munich, Germany.
    3. Jorg Bibow, 2002. "The Monetary Policies of the European Central Bank and the Euro's (Mal-)Performance: A stability-oriented assessment," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(1), pages 31-50.

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