IDEAS home Printed from https://ideas.repec.org/p/lev/wrkpap/wp_242.html
   My bibliography  Save this paper

Money and Credit in a Keynesian Model of Income Determination

Author

Listed:
  • Wynne Godley

Abstract

This paper formally integrates the theory of money and credit derived ultimately from Wicksell into the Keynesian theory of income determination, with assets allocated according to Tobinesque principles. The model deployed has much in common with the modern "endogenous money" school initiated by Kaldor which emphasizes the essential role played by credit in any real life economy, since production takes time and the future is always uncertain. New ground is broken methodologically because all the propositions are justified by simulations of a rigorous (60-equation) model, making it possible to pin down exactly why the results come out as they do. One conclusion of the paper is that there is no such thing as a supply of money distinct from the money which agents wish to hold or find themselves holding. This finding is inimical, possibly in the end lethal, to the way macroeconomics is currently taught as well as to the neoclassical paradigm itself.

Suggested Citation

  • Wynne Godley, 1998. "Money and Credit in a Keynesian Model of Income Determination," Economics Working Paper Archive wp_242, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_242
    as

    Download full text from publisher

    File URL: http://www.levyinstitute.org/pubs/wp242.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. John Smithin, 1994. "Controversies In Monetary Economics," Books, Edward Elgar Publishing, number 412.
    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. Agustin Filippo & Daniel Kostzer & Diego Schleser, 2005. "Creditos a PyMEs en Argentina: Racionamiento crediticio con oferta ilimitada de dinero," Finance 0501004, University Library of Munich, Germany.
    2. Jamee K. Moudud, "undated". "Government Spending in a Growing Economy, Fiscal Policy and Growth Cycles," Economics Public Policy Brief Archive ppb_52, Levy Economics Institute.

    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. Eckhard Hein, 2006. "Money, interest and capital accumulationin Karl Marx's economics: a monetary interpretation and some similaritiesto post-Keynesian approaches," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 13(1), pages 113-140.
    2. John T. Harvey, 2004. "Deviations from uncovered interest rate parity: a Post Keynesian explanation," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 27(1), pages 19-35.
    3. Imad Moosa, 2017. "Covered interest parity: The untestable hypothesis," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 40(4), pages 470-486, October.
    4. Kam, Eric & Smithin, John, 2008. "‘Unequal Partners’: The Role of International Financial Flows and the Exchange Rate Regime," The Journal of Economic Asymmetries, Elsevier, vol. 5(1), pages 125-137.
    5. Giuseppe Fontana, 2006. "The 'New Consensus' View of Monetary Policy: A New Wicksellian Connection?," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 3(2), pages 263-278.
    6. Enrico Sergio Levrero, 2021. "Estimates of the Natural Rate of Interest and the Stance of Monetary Policies: A Critical Assessment," International Journal of Political Economy, Taylor & Francis Journals, vol. 50(1), pages 5-27, February.
    7. Claude Gnos & Louis-Philippe Rochon, 2007. "The New Consensus and Post-Keynesian Interest Rate Policy," Review of Political Economy, Taylor & Francis Journals, vol. 19(3), pages 369-386.
    8. John Smithin, 2016. "Endogenous Money, Fiscal Policy, Interest Rates and the Exchange Rate Regime: A Comment on Palley, Tymoigne and Wray," Review of Political Economy, Taylor & Francis Journals, vol. 28(1), pages 64-78, January.
    9. Angel Asensio, 2009. "Between the cup and the lip," CEPN Working Papers halshs-00496911, HAL.
    10. Eckhard Hein, 2019. "Karl Marx: an early post-Keynesian? A comparison of Marx's economics with the contributions by Sraffa, Keynes, Kalecki and Minsky," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 16(2), pages 238-259, September.
    11. Giuseppe Mastromatteo & Luigi Ventura, 2007. "The origin of money: A survey of the contemporary literature," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 54(2), pages 195-224, June.
    12. Paraskevopoulos, Christos C. & Paschakis, John & Smithin, John, 1996. "Is monetary sovereignty an option for the small open economy?," The North American Journal of Economics and Finance, Elsevier, vol. 7(1), pages 5-18.
    13. J. W. Nevile & Peter Kriesler, 2014. "A bright future can be ours! Macroeconomic policy for non-eurozone Western countries," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 38(6), pages 1453-1470.
    14. Marc Lavoie, 2000. "A Post Keynesian View of Interest Parity Theorems," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 23(1), pages 163-179, September.
    15. Bhatti, Razzaque H., 2014. "The existence of uncovered interest parity in the CIS countries," Economic Modelling, Elsevier, vol. 40(C), pages 227-241.
    16. Louis-Philippe Rochon, 2001. "Cambridge's Contribution to Endogenous Money: Robinson and Kahn on credit and money," Review of Political Economy, Taylor & Francis Journals, vol. 13(3), pages 287-307.
    17. Hein, Eckhard, 1999. "Zentralbank-Politik und makroökonomische Ergebnisse: eine sozio-institutionelle Interpretation [Central Bank Policies and Macroeconomic Results: A Socio-institutional Interpretation]," MPRA Paper 18881, University Library of Munich, Germany.
    18. Hein, Eckhard, 2001. "Institutions and macroeconomic performance: Central bank independence, labour market institutions and the perspectives for inflation and employment in the European Monetary Union," WSI Working Papers 95, The Institute of Economic and Social Research (WSI), Hans Böckler Foundation.
    19. Hein, Eckhard, 2002. "Monetary policy and wage bargaining in the EMU: Restrictive ECB policies, high unemployment, nominal wage restraint and rising inflation," WSI Working Papers 103, The Institute of Economic and Social Research (WSI), Hans Böckler Foundation.
    20. Eric Kam & John Smithin & Aqeela Tabassum, 2018. "The Long-Run Non-Neutrality of Monetary Policy: A General Statement in a Dynamic General Equilibrium Model," Working Papers 074, Toronto Metropolitan University, Department of Economics.

    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:lev:wrkpap:wp_242. 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: Elizabeth Dunn (email available below). General contact details of provider: http://www.levyinstitute.org .

    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.