IDEAS home Printed from https://ideas.repec.org/p/usi/wpaper/757.html
   My bibliography  Save this paper

Beyond the traditional monetary circuit: endogenous money, finance and the theory of long-period effective demand

Author

Listed:
  • Sergio Cesaratto

Abstract

The paper is a contribution to a long-run theory of effective demand with elements from monetary circuit theory, Modern Monetary Theory and endogenous finance analysis. Some shortcomings of the still influential neo-Kaleckian growth model and monetary circuit theory are underlined, and the Sraffian supermultiplier is indicated as the most promising heterodox approach to growth and instability in capitalism. The Sraffian supermultiplier allows full consideration of the autonomous components of aggregate demand as the ultimate sources of growth and instability in modern capitalism. Following Steindl, capital gains are included among these components. Autonomous demand and investment are typically fed by endogenous finance. The paper articulates the relation between autonomous demand and investment on one hand, and endogenous finance on the other, in the light of Keynes’s distinction between initial and final finance.

Suggested Citation

  • Sergio Cesaratto, 2017. "Beyond the traditional monetary circuit: endogenous money, finance and the theory of long-period effective demand," Department of Economics University of Siena 757, Department of Economics, University of Siena.
    • Handle: RePEc:usi:wpaper:757
    as

    Download full text from publisher

    File URL: http://repec.deps.unisi.it/quaderni/757.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Cedric Durand & Sébastien Villemot, 2016. "Balance sheets after the EMU : an assessment of the redenomination risk," Documents de Travail de l'OFCE 2016-31, Observatoire Francais des Conjonctures Economiques (OFCE).
    2. Girardi , Daniele & Pariboni, Riccardo, 2015. "Autonomous demand and economic growth: some empirical evidence," Centro Sraffa Working Papers CSWP13, Centro di Ricerche e Documentazione "Piero Sraffa".
    3. J. Steindl, 1998. "Capital gains in economic theory and national accounting," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 51(207), pages 435-449.
    4. Olivier Allain, 2015. "Tackling the instability of growth: a Kaleckian-Harrodian model with an autonomous expenditure component," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 39(5), pages 1351-1371.
    5. Marc Lavoie, 2017. "Prototypes, Reality and the Growth Rate of Autonomous Consumption Expenditures: A Rejoinder," Metroeconomica, Wiley Blackwell, vol. 68(1), pages 194-199, February.
    6. Alberto Botta & Eugenio Caverzasi & Daniele Tori, 2015. "Financial–Real-Side Interactions in an Extended Monetary Circuit with Shadow Banking: Loving or Dangerous Hugs?," International Journal of Political Economy, Taylor & Francis Journals, vol. 44(3), pages 196-227, July.
    7. Brett Fiebiger, 2016. "Fiscal Policy, Monetary Policy and the Mechanics of Modern Clearing and Settlement Systems," Review of Political Economy, Taylor & Francis Journals, vol. 28(4), pages 590-608, October.
    8. Marc Lavoie, 2016. "Convergence Towards the Normal Rate of Capacity Utilization in Neo-Kaleckian Models: The Role of Non-Capacity Creating Autonomous Expenditures," Metroeconomica, Wiley Blackwell, vol. 67(1), pages 172-201, February.
    9. Marc Lavoie, 2014. "Post-Keynesian Economics: New Foundations," Post-Print hal-01343652, HAL.
    10. J. Steindl, 1998. "Capital gains in economic theory and national accounting," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 51(207), pages 435-449.
    11. Paul Dalziel, 1996. "The Keynesian Multiplier, Liquidity Preference, and Endogenous Money," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 18(3), pages 311-331, March.
    12. Riccardo Pariboni, 2016. "Household consumer debt, endogenous money and growth: A supermultiplier-based analysis," PSL Quarterly Review, Economia civile, vol. 69(278), pages 211-234.
    13. Bordo, Michael & James, Harold, 2014. "The European Crisis in the Context of the History of Previous Financial Crises," Journal of Macroeconomics, Elsevier, vol. 39(PB), pages 275-284.
    14. Pierangelo Garegnani, 2024. "Value and Distribution in the Classical Economists and Marx," Springer Studies in the History of Economic Thought, in: Roberto Ciccone (ed.), Capital Theory, the Surplus Approach, and Effective Demand, pages 305-340, Springer.
    15. Basil J. Moore, 1983. "Unpacking the Post Keynesian Black Box: Bank Lending and the Money Supply," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 5(4), pages 537-556, July.
    16. Marc Lavoie, 2017. "Prototypes, reality and the growth of autonomous expenditures: a rejoinder," Post-Print hal-01435724, HAL.
    17. Claudio Borio & Piti Disyatat, 2015. "Capital flows and the current account: Taking financing (more) seriously," BIS Working Papers 525, Bank for International Settlements.
    18. Olivier Allain, 2013. "Tackling the instability of growth: A Kaleckian model with autonomous demand expenditures," Post-Print halshs-00821080, HAL.
    19. repec:hal:spmain:info:hdl:2441/7d576lom6n8up9mj8qdcmjnufl is not listed on IDEAS
    20. Marc Lavoie, 2022. "Post-Keynesian Economics," Books, Edward Elgar Publishing, number 19900.
    21. Sergio Cesaratto & Antonella Stirati, 2010. "Germany and the European and Global Crises," International Journal of Political Economy, Taylor & Francis Journals, vol. 39(4), pages 56-86.
    22. Sergio Cesaratto & Gary Mongiovi, 2015. "Pierangelo Garegnani, the Classical Surplus Approach and Demand-led Growth: Introduction to the Symposium," Review of Political Economy, Taylor & Francis Journals, vol. 27(2), pages 103-110, April.
    23. Sergio Cesaratto, 2013. "The implications of TARGET2 in the European balance of payments crisis and beyond," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 10(3), pages 359-382.
    24. Sergio Cesaratto, 2015. "Neo-Kaleckian and Sraffian Controversies on the Theory of Accumulation," Review of Political Economy, Taylor & Francis Journals, vol. 27(2), pages 154-182, April.
    25. repec:hal:cepnwp:hal-01383691 is not listed on IDEAS
    26. Oscar de-Juan, 2005. "Paths of accumulation and growth: Towards a Keynesian long-period theory of output," Review of Political Economy, Taylor & Francis Journals, vol. 17(2), pages 231-252.
    27. Fabian Lindner, 2015. "Does Saving Increase the Supply of Credit? A Critique of Loanable Funds Theory," World Economic Review, World Economics Association, vol. 2015(4), pages 1-1, February.
    28. Michael Bordo & Harold James, 2013. "The European crisis in the context of the history of previous financial crises," Special Conference Papers 18, Bank of Greece.
    29. Fabio Freitas & Franklin Serrano, 2015. "Growth Rate and Level Effects, the Stability of the Adjustment of Capacity to Demand and the Sraffian Supermultiplier," Review of Political Economy, Taylor & Francis Journals, vol. 27(3), pages 258-281, July.
    30. Eckhard Hein, 2017. "Post-Keynesian macroeconomics since the mid 1990s: main developments," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(2), pages 131-172, September.
    31. Paul Davidson, 1986. "Finance, Funding, Saving, and Investment," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 9(1), pages 101-110, September.
    32. Sergio Cesaratto & Franklin Serrano & Antonella Stirati, 2003. "Technical Change, Effective Demand and Employment," Review of Political Economy, Taylor & Francis Journals, vol. 15(1), pages 33-52.
    33. Giuseppe Fontana & Riccardo Realfonzo, 2017. "Augusto Graziani and recent advances in the monetary theory of production," Metroeconomica, Wiley Blackwell, vol. 68(2), pages 202-204, May.
    34. PhilippineCour-Thimann, 2013. "CESifo Forum Special Issue April 2013: Target Balances and the Crisis in the Euro Area," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 0, pages 05-50, May.
    35. Pierangelo Garegnani, 2015. "The Problem of Effective Demand in Italian Economic Development: On the Factors that Determine the Volume of Investment," Review of Political Economy, Taylor & Francis Journals, vol. 27(2), pages 111-133, April.
    36. Claudio Borio & Piti Disyatat, 2011. "Global imbalances and the financial crisis: Link or no link?," BIS Working Papers 346, Bank for International Settlements.
    37. Aldo Barba & Massimo Pivetti, 2009. "Rising household debt: Its causes and macroeconomic implications--a long-period analysis," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 33(1), pages 113-137, January.
    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. Ettore Gallo & Maria Cristina Barbieri Góes, 2023. "Investment, autonomous demand and long-run capacity utilization: an empirical test for the Euro Area," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(1), pages 225-255, April.
    2. Ehnts, Dirk H., 2020. "The fiscal-monetary nexus in Germany," IPE Working Papers 138/2020, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    3. Sergio Cesaratto & Stefano di Bucchianico, 2020. "Endogenous money and the theory of long-period effective demand," Bulletin of Political Economy, Bulletin of Political Economy, vol. 14(1), pages 1-38, June.
    4. Sergio Cesaratto, 2017. "Bofinger and Ries versus Borio and Disyatat: macroeconomics after endogenous money. A brief note," Department of Economics University of Siena 763, Department of Economics, University of Siena.
    5. Cesaratto, Sergio, 2017. "Garegnani, Ackley and the years of high theory at Svimez," Centro Sraffa Working Papers CSWP26, Centro di Ricerche e Documentazione "Piero Sraffa".

    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. Sergio Cesaratto & Stefano di Bucchianico, 2020. "Endogenous money and the theory of long-period effective demand," Bulletin of Political Economy, Bulletin of Political Economy, vol. 14(1), pages 1-38, June.
    2. Ettore Gallo & Maria Cristina Barbieri Góes, 2023. "Investment, autonomous demand and long-run capacity utilization: an empirical test for the Euro Area," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(1), pages 225-255, April.
    3. Guilherme Haluska & Julia Braga & Ricardo Summa, 2021. "Growth, investment share and the stability of the Sraffian Supermultiplier model in the U.S. economy (1985–2017)," Metroeconomica, Wiley Blackwell, vol. 72(2), pages 345-364, May.
    4. Daniele Girardi & Riccardo Pariboni, 2019. "Normal utilization as the adjusting variable in Neo‐Kaleckian growth models: A critique," Metroeconomica, Wiley Blackwell, vol. 70(2), pages 341-358, May.
    5. Sergio Cesaratto, 2016. "The modern revival of the Classical surplus approach: implications for the analysis of growth and crises," Department of Economics University of Siena 735, Department of Economics, University of Siena.
    6. Mauro Caminati & Serena Sordi, 2019. "Demand‐led growth with endogenous innovation," Metroeconomica, Wiley Blackwell, vol. 70(3), pages 405-422, July.
    7. Sergio Cesaratto, 2017. "The Nature of the Eurocrisis. A Reply to Febrero, Uxò and Bermejo," a/ Working Papers Series 1703, Italian Association for the Study of Economic Asymmetries, Rome (Italy).
    8. Eckhard Hein & Ryan Woodgate, 2021. "Stability issues in Kaleckian models driven by autonomous demand growth—Harrodian instability and debt dynamics," Metroeconomica, Wiley Blackwell, vol. 72(2), pages 388-404, May.
    9. Sergio Cesaratto, 2017. "Initial and Final Finance in the Monetary Circuit and the Theory of Effective Demand," Metroeconomica, Wiley Blackwell, vol. 68(2), pages 228-258, May.
    10. Sergio Cesaratto, 2016. "La financiación inicial y final en el circuito monetario y la teoría de la demanda efectiva," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 18(35), pages 47-78, July-Dece.
    11. Eckhard Hein & Valeria Jimenez, 2022. "The macroeconomic implications of zero growth: a post-Keynesian approach," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 19(1), pages 41-60, April.
    12. Nah, Won Jun & Lavoie, Marc, 2019. "The role of autonomous demand growth in a neo-Kaleckian conflicting-claims framework’," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 427-444.
    13. Peter Skott, 2019. "Autonomous demand, Harrodian instability and the supply side," Metroeconomica, Wiley Blackwell, vol. 70(2), pages 233-246, May.
    14. Pariboni, Riccardo & Girardi, Daniele, 2018. "A(nother) Note on the Inconsistency of Neo-Kaleckian Growth Models," Centro Sraffa Working Papers CSWP31, Centro di Ricerche e Documentazione "Piero Sraffa".
    15. Dejuán, Óscar & McCombie, John S.L., 2018. "The Supermultiplier-Cum-Finance. Economic Limits of a Credit Driven System," Centro Sraffa Working Papers CSWP32, Centro di Ricerche e Documentazione "Piero Sraffa".
    16. Daniele Girardi & Riccardo Pariboni, 2020. "Autonomous demand and the investment share," Review of Keynesian Economics, Edward Elgar Publishing, vol. 8(3), pages 428-453, July.
    17. Lídia Brochier & Antonio Carlos, 2019. "A supermultiplier Stock-Flow Consistent model: the “return” of the paradoxes of thrift and costs in the long run?," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 43(2), pages 413-442.
    18. Gahn, Santiago José, 2021. "On the adjustment of capacity utilisation to aggregate demand: Revisiting an old Sraffian critique to the Neo-Kaleckian model," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 325-360.
    19. José A. Pérez‐Montiel & Carles Manera, 2022. "Is autonomous demand really autonomous in the United States? An asymmetric frequency‐domain Granger causality approach," Metroeconomica, Wiley Blackwell, vol. 73(1), pages 78-92, February.
    20. Michalis Nikiforos, 2018. "Some Comments on the Sraffian Supermultiplier Approach to Growth and Distribution," Economics Working Paper Archive wp_907, Levy Economics Institute.

    More about this item

    Keywords

    Supermultiplier; endogenous money; monetary circuit theory; modern monetary theory; autonomous demand;
    All these keywords.

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:usi:wpaper:757. 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: Fabrizio Becatti (email available below). General contact details of provider: https://edirc.repec.org/data/desieit.html .

    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.