Endogenous currency and monetary theory of production
Abstract
The aim of this paper is to examine the compatibility of Keynes’ monetary production
theory with the “horizontalist” approach to the determination of the interest rates
and the money supply. According to Moore the short-term interest rates are exogenously
determined by central banks, so that the portfolio approach to its determination, based on
the liquidity preference theory, is incorrect. Keynes’ theory, on the other hand, emphasizes
the nature of money as an asset, whose interest rate, endogenously determined by liquidity
preference, will set the limit to the marginal efficiency of other assets. This essay suggests
that the “horizontalist” approach is not compatible with Keynes’s view on “money as a ‘real’
factor”.
JEL Classification: B50; E12.
Keywords: Money supply interest rate determinantion` post-keynesianism endogenous money