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The financial side: endogenous money and the supermultipliercum-finance

In: The Supermultiplier

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Abstract

This chapter introduces banks as a “vertically integrated sector” and money as the means of payments (deposits) derived from bank loans. The stock-flow consistency is the third pillar of our monetary theory. These are the main conclusions of the chapter. (1) The supermultiplier-cum-finance is based on the money endogeneity hypothesis. It explains the introduction of liquidity via bank loans and the withdrawal of the means of payments through the debt service procedure. (2) The money endogeneity hypothesis is more an equilibrium condition than a description of the actual economic process; bank autonomy allows them to finance non-productive activities. (3) A persistent gap between credit and output expansion is the cause of financial mismatches: overindebtedness leading to demand deflation and excess liquidity leading to asset inflation.

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  • ., 2023. "The financial side: endogenous money and the supermultipliercum-finance," Chapters, in: The Supermultiplier, chapter 5, pages 67-92, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:20864_5
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    File URL: https://www.elgaronline.com/doi/10.4337/9781800889552.00010
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    Economics and Finance;

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