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Intermediation, Money Creation, and Keynesian Macrodynamics in Multi-agent Systems

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  • Bill Gibson
  • Mark Setterfield

Abstract

This paper offers a simple computational model of monetary creation, derived from individual agent behavior, that provides additional support for the well-known and more or less universally accepted idea that money creation is inevitable in demand-driven Keynesian economies. The endogeneity of money is linked to asynchronous production, in which investment is set autonomously by a combination of animal spirits and capacity utilization, while savings adjusts to bring about macroeconomic equilibrium. It is seen that once these Keynesian motifs are translated into the agent-based framework, endogenous money arises as a natural consequence of the model. The contribution of the paper is twofold. First, it links endogenous money creation to decision making in real historical time—two shibboleths of post-Keynesian macroeconomics. Second, it suggests a fruitful cross-fertilization between post-Keynesian economics and the methods of agent-based modeling.

Suggested Citation

  • Bill Gibson & Mark Setterfield, 2018. "Intermediation, Money Creation, and Keynesian Macrodynamics in Multi-agent Systems," Review of Political Economy, Taylor & Francis Journals, vol. 30(2), pages 154-171, April.
    • Handle: RePEc:taf:revpoe:v:30:y:2018:i:2:p:154-171
    DOI: 10.1080/09538259.2018.1458494
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    References listed on IDEAS

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    1. Robert Pollin, 1991. "Two Theories of Money Supply Endogeneity: Some Empirical Evidence," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 13(3), pages 366-396, March.
    2. Sheila C. Dow, 2007. "Endogenous Money: Structuralist," Chapters, in: Philip Arestis & Malcolm Sawyer (ed.), A Handbook of Alternative Monetary Economics, chapter 3, Edward Elgar Publishing.
    3. Thomas I. Palley, 2013. "Horizontalists, verticalists, and structuralists: the theory of endogenous money reassessed," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(4), pages 406—424-4, OCT.
    4. Victoria Chick, 1983. "Macroeconomics after Keynes: A Reconsideration of the General Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530457, December.
    5. Marc Lavoie, 2007. "Endogenous Money: Accommodationist," Chapters, in: Philip Arestis & Malcolm Sawyer (ed.), A Handbook of Alternative Monetary Economics, chapter 2, Edward Elgar Publishing.
    6. Edgardo Bucciarelli & Marcello Silvestri, 2013. "Hyman P. Minsky's unorthodox approach: recent advances in simulation techniques to develop his theoretical assumptions," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 36(2), pages 299-324.
    7. Philip Arestis & Malcolm Sawyer (ed.), 2007. "A Handbook of Alternative Monetary Economics," Books, Edward Elgar Publishing, number 3506.
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    Cited by:

    1. Roberto Veneziani & Luca Zamparelli & Corrado Di Guilmi, 2017. "The Agent-Based Approach To Post Keynesian Macro-Modeling," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1183-1203, December.

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    More about this item

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • C00 - Mathematical and Quantitative Methods - - General - - - General

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