IDEAS home Printed from https://ideas.repec.org/a/taf/revpoe/v19y2007i4p539-554.html
   My bibliography  Save this article

Central Banking and Post-Keynesian Economics

Author

Listed:
  • Louis-Philippe Rochon
  • Sergio Rossi

Abstract

The Post-Keynesian theory of endogenous money has given much attention to the role of the central bank in the money creation process. Circuit theory has neglected this role, in so far as it has focused on the relationship between banks and firms within a monetary production economy. The aim of this paper is therefore twofold. First, it intends to fill this gap in circuit theory, by providing a role for the central bank in settlement of interbank debts. Secondly, it aims at reinforcing the Post-Keynesian analysis of central bank money by considering both the money-purveying and the credit-purveying roles of the settlement institution in the interbank market. The result of this analysis is a more comprehensive theory of endogenous money, where the lender-of-last-resort facilities of a central bank are viewed as an endogenous phenomenon involving both a money creation and a credit operation between the central bank and the domestic banking system. In such a framework, monetary policy consists of setting the base rate of interest at a level that enables banks to limit their bilateral debt position in the interbank market, so as not to disrupt the workings of the payment system by either an illiquidity or an insolvency crisis.

Suggested Citation

  • Louis-Philippe Rochon & Sergio Rossi, 2007. "Central Banking and Post-Keynesian Economics," Review of Political Economy, Taylor & Francis Journals, vol. 19(4), pages 539-554.
    • Handle: RePEc:taf:revpoe:v:19:y:2007:i:4:p:539-554
    DOI: 10.1080/09538250701622402
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/09538250701622402
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/09538250701622402?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Graziani,Augusto, 2003. "The Monetary Theory of Production," Cambridge Books, Cambridge University Press, number 9780521812115, January.
    2. Louis-Philippe Rochon & Sergio Rossi (ed.), 2006. "Monetary and Exchange Rate Systems," Books, Edward Elgar Publishing, number 3828.
    3. Louis-Philippe Rochon & Sergio Rossi (ed.), 2003. "Modern Theories of Money," Books, Edward Elgar Publishing, number 2506.
    4. Louis-Philippe Rochon, 1999. "Credit, Money and Production," Books, Edward Elgar Publishing, number 1565.
    5. L. R. Wray, 1990. "Money and Credit in Capitalist Economies," Books, Edward Elgar Publishing, number 474.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Canale, Rosaria Rita, 2011. "Default risk and fiscal sustainability in PIIGS countries," MPRA Paper 32215, University Library of Munich, Germany.
    2. Nazim Kadri Ekinci, 2018. "Credit, Capital Flows and Monetary Policy: A Post-Keynesian Analysis," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 4(2), pages 55-74, December.
    3. Guido Traficante & Guglielmo Forges Davanzati, 2018. "La restrizione del credito in uno schema di teoria monetaria della produzione: il caso italiano," Moneta e Credito, Economia civile, vol. 71(283), pages 211-233.
    4. Nadia Oliva & Andrea Pacella, 2016. "The Ethics Inside the Monetary Circuit: How Bank’s Social Responsibility Affects Money Creation," International Journal of Business and Management, Canadian Center of Science and Education, vol. 11(7), pages 1-1, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Louis-Philippe Rochon & Sergio Rossi, 2013. "Endogenous money: the evolutionary versus revolutionary views," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(2), pages 210-229, January.
    2. Louis-Phillippe Rochon, 2012. "Money’s Endogeneity, Keynes’s General Theory and Beyond," Chapters, in: Thomas Cate (ed.), Keynes’s General Theory, chapter 13, Edward Elgar Publishing.
    3. Bill Lucarelli, 2011. "The Economics of Financial Turbulence," Books, Edward Elgar Publishing, number 14252.
    4. Jussi Ahokas, 2012. "Geographies of Monetary Economy and the European economic crisis," ERSA conference papers ersa12p437, European Regional Science Association.
    5. Eckhard Hein, 2007. "Interest Rate, Debt, Distribution And Capital Accumulation In A Post‐Kaleckian Model," Metroeconomica, Wiley Blackwell, vol. 58(2), pages 310-339, May.
    6. Wenzlaff, Ferdinand & Kimmich, Christian & Richters, Oliver, 2014. "Theoretische Zugänge eines Wachstumszwangs in der Geldwirtschaft," ZÖSS-Discussion Papers 45, University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS).
    7. Biagio Bossone, 2021. "Bank Seigniorage in a Monetary Production Economy," Working Papers PKWP2111, Post Keynesian Economics Society (PKES).
    8. Massimo Cingolani, 2015. "Sylos Labini su Marx: implicazioni per la politica economica (Sylos Labini on Marx: economic policy implications)," Moneta e Credito, Economia civile, vol. 68(269), pages 81-147.
    9. Diarmid Weir, 2013. "Fiat Money, Individual Rationality and Production," Metroeconomica, Wiley Blackwell, vol. 64(4), pages 573-590, November.
    10. Dirk J. Bezemer, 2012. "Modelos contables y comprensión de la crisis financiera," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 14(26), pages 47-76, January-J.
    11. Jesper Jespersen, 2012. "Keynes’s General Theory after 75 years: time to re-read and reflect," Chapters, in: Jesper Jespersen & Mogens Ove Madsen (ed.), Keynes’s General Theory for Today, chapter 8, pages 131-150, Edward Elgar Publishing.
    12. Eladio Febrero & Maria-Angeles Cadarso, 2006. "Pay-As-You-Go versus funded systems. Some critical considerations," Review of Political Economy, Taylor & Francis Journals, vol. 18(3), pages 335-357.
    13. Badarudin, Z.E. & Ariff, M. & Khalid, A.M., 2013. "Post-Keynesian money endogeneity evidence in G-7 economies," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 146-162.
    14. Edouard Cottin-Euziol & Nicolas Piluso, 2020. "Revenues and demand in a monetary economy of production [Revenus et demande dans une économie monétaire de production]," Working Papers hal-02511407, HAL.
    15. Hein, Eckhard, 2010. "The rate of interest as a macroeconomic distribution parameter: Horizontalism and Post-Keynesian models of distribution of growth," MPRA Paper 23372, University Library of Munich, Germany.
    16. Massimo Cingolani, 2013. "Finance Capitalism: A Look at the European Financial Accounts," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(3), pages 249-290, May.
    17. Sergio Cesaratto, 2016. "When Robertson was Keynesian and Keynes Robertsonian: a discussion between D.H.R. and J.M.K. in the early 1930s and the problems with the Monetary Circuit Theory. A note," Department of Economics University of Siena 732, Department of Economics, University of Siena.
    18. Eckhard Hein, 2006. "Interest, Debt and Capital Accumulation—A Kaleckian Approach," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(3), pages 337-352.
    19. Sánchez, Julián, 2004. "The Basic Dynamics of the Stock of Money and Capital," Working Papers in Economic Theory 2004/01, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
    20. Stelios Karagiannis & Yannis Panagopoulos & Aristotelis Spiliotis, 2011. "The Basel II Influence on the Money Supply Process: A Comparative Analysis of the Eurozone and the United States," Chapters, in: Claude Gnos & Louis-Philippe Rochon (ed.), Credit, Money and Macroeconomic Policy, chapter 9, Edward Elgar Publishing.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:revpoe:v:19:y:2007:i:4:p:539-554. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CRPE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.