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The Money Supply

In: The Creators of Inside Money

Author

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  • D. Gareth Thomas

    (University of Hertfordshire Business School)

  • David S. Bywaters

Abstract

In particular the need is to develop a monetary model that goes beyond the traditional theory of a barter system, or one with one-commodity used as money to proxy the ‘workings’ of a modern-day economy, with credit. The assumption of money neutrality is dropped along with the mistake of treating the medium of exchange as a ‘veil’. A proper study of money and credit supply must involve a tripartite system of agents in the form of depositors (which includes households and firms), retail banks and the monetary authorities. They determine the money supply process within the economic system together. It is the interaction of these economic actors that determines the supply of money in the form of a monetary multiplier that supports the real economy. Compared with the previous study, the data has been revised along with the presentation of the mathematical formulations to enhance greater understanding of the analysis and the contribution of the agents involved in the endogenous process. It also now includes an historical review of the literature on money and credit that leads to the loanable funds model.

Suggested Citation

  • D. Gareth Thomas & David S. Bywaters, 2021. "The Money Supply," Springer Books, in: The Creators of Inside Money, edition 2, chapter 0, pages 11-31, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-70366-0_2
    DOI: 10.1007/978-3-030-70366-0_2
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