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date: 23 January 2022

Abstract and Keywords

Endogenous money is a key feature of post-Keynesian monetary economics and of monetary circuit theory. This chapter highlights the contributions and the evolution of Wynne Godley’s views on money, as they have evolved toward what Godley first called the real stock flow monetary model, which later became known as the stock-flow coherent model, showing that his views encompass post-Keynesian economics and monetary circuit theory. The chapter first recapitulates what it considers to be the main features of post-Keynesian monetary analysis. It then presents the work of Godley and his efforts to develop a systemic understanding of an economy and how money comes about. It also considers the role of banks and how they achieve their portfolio objectives. Finally, it explores how these stock-flow coherent principles fit in the context of an open economy and discusses some implications of the subprime financial crisis for monetary theory.

Keywords: endogenous money, monetary economics, commercial banking, Wynne Godley, real stock flow monetary model, stock-flow coherent model, monetary analysis, open economy, financial crisis, monetary theory

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