Two Theories of Money Supply Endogeneity: Some Empirical Evidence
Author(s)
Pollin, Robert
Abstract
Two approaches to the theory of money supply endogeneity have developed within post-Keynesian economics. “Accommodative endogeneity” develops from authors such as Nicholas Kaldor, Basil Moore, and Sidney Weintraub. “Structural endogeneity” derives from Hyman Minsky, Stephen Rousseas, and others. Considering the U.S. economy, three sets of empirical relationships are considered to investigate the relative strength of these approaches: the proportionality in the movements of loans and reserves; the substitutability between borrowed and nonborrowed reserves; and the patterns of Granger causality between market and Federal Reserve-controlled interest rates. Overall, the results support the structural over the accommodative theory of endogeneity.
