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Money and Monetary Policy in a Kaldor-Pasinetti-Sraffa-Keynes Framework

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Abstract

This paper investigates the role of money and the transmission of monetary policy in a model characterised by interest-insensitive expenditures and unemployment equilibria. It first outlines the structure of what is called a Kaldor-Pasinetti-Sraffa-Keynes (KPSK) model where output is determined by the principle of effective demand, expenditures are determined by income distribution, and prices are determined along Sraffian lines. It secondly explores the role of money in this kind of model, assuming first an exogenous money supply and then an endogenous one, and compares the difference between these two sets of monetary arrangements for the model’s key macroeconomic variables: output, employment and prices. This exploration provides evidence that endogenous money is a necessary condition for the attainment of an unemployment equilibrium. The paper thirdly examines the operation of a Taylor rule in the conduct of monetary policy within a KPSK model, comparing its impact with that in a neoclassical macro model where such rules generate full employment. The paper concludes with some observations about the relationship between the concepts of money supply endogeneity, the interest-insensitivity of expenditures and money non-neutrality in models of the KPSK variety.

Suggested Citation

  • Peter Docherty, 2008. "Money and Monetary Policy in a Kaldor-Pasinetti-Sraffa-Keynes Framework," Working Paper Series 153, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    • Handle: RePEc:uts:wpaper:153
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    References listed on IDEAS

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    1. Peter Docherty, 2006. "Endogenous Money, Non-neutrality and Interest-sensitivity in the Theory of Long Period Unemployment," Working Paper Series 148, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    2. Mark Setterfield (ed.), 2002. "The Economics of Demand-Led Growth," Books, Edward Elgar Publishing, number 1864, March.
    3. Kaldor, Nicholas, 1986. "The Scourge of Monetarism: Radcliffe Lectures," OUP Catalogue, Oxford University Press, edition 2, number 9780198772484.
    4. Pierangelo Garegnani, 2024. "Notes on Consumption, Investment and Effective Demand: II," Springer Studies in the History of Economic Thought, in: Roberto Ciccone (ed.), Capital Theory, the Surplus Approach, and Effective Demand, pages 411-434, Springer.
    5. Cottrell, Allin, 1994. "Post-Keynesian Monetary Economics," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 18(6), pages 587-605, December.
    6. Rowthorn, R E, 1977. "Conflict, Inflation and Money," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 1(3), pages 215-239, September.
    7. 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.
    8. Peter Docherty, 2005. "Money and Employment," Books, Edward Elgar Publishing, number 2578, March.
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    More about this item

    Keywords

    endogenous money; money non-neutrality; long period unemployment;
    All these keywords.

    JEL classification:

    • 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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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