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date: 23 January 2022

Abstract and Keywords

One of the main tenets of post-Keynesian economics is that money is endogenous, meaning that the supply of money is determined by the demand for loans, and the latter originates within the economic system in order to finance the production and accumulation processes or the upsurge of speculative purchases. The main policy implication of this theory is that money and monetary policy are not neutral, neither in the short nor the long run. The debate between what are usually labeled horizontalists (or accommodationists) and structuralists is based around three arguments First, there is disagreement over the degree of accommodation by central banks to the demand for reserves of commercial banks. Second, there is a discussion about the meaning and relevance of the liquidity preference of commercial banks. Third, there is a controversy over the implication of the liquidity preference of the nonbank public sector. This chapter explores the controversial issues between horizontalists and structuralists in terms of graphical analyses of the reserve market, the credit market, and the financial markets.

Keywords: post-Keynesian economics, endogenous money, money supply, monetary policy, horizontalists, structuralists, liquidity preference, reserve market, credit market, financial markets

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