Post Keynesian monetary theory : an empirical investigation

Hutchings, Dugald. (1996). Post Keynesian monetary theory : an empirical investigation Honours Thesis, School of Economics, University of Queensland.

       
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Author Hutchings, Dugald.
Thesis Title Post Keynesian monetary theory : an empirical investigation
School, Centre or Institute School of Economics
Institution University of Queensland
Publication date 1996
Thesis type Honours Thesis
Total pages 70
Language eng
Subjects 14 Economics
Formatted abstract
For many years "textbook" economic theory has proceeded on the basis that the money supply is exogenous. It is assumed that central banks, by changing the money base, alter the money supply to whatever level is desired. The post Keynesian school argues that this view is unrealistic and in practice the money base is endogenous to some extent. The purpose of this study was to determine whether post Keynesian monetary theory is supported by recent Australian data.

This thesis examines the causal relationship between the money base, the money supply and bank lending in Australia over the period 1980(1) to 1995(3). Causation from the money base to the money supply to bank lending supports the orthodox "money multiplier" view, while causation from bank lending to the money supply to the money base supports the post Keynesian view. Horizontalist post Keynesians take the extreme position that the money base is completely endogenous and that causation runs solely from bank lending to the money supply to the money base. Structuralist post Keynesians argue that the money supply can be exogenously changed by a central bank but is also subject to endogenous change. Causation should therefore exist in both directions.

The method used in this thesis was to replicate the testing procedures used by Basil Moore, a prominent horizontalist post Keynesian, in relation to Australian data. The results of this study indicate 'bidirection.al causation between the money base, the money supply and bank lending. This supports the structuralist post Keynesian view and implies that the horizontalist post Keynesian view and the orthodox view can be rejected. The testing procedures are based on Granger causality. This study improves on Moore's method by allowing for cointegration and optimal lag length.

Document type: Thesis
Collection: UQ Theses (non-RHD) - UQ staff and students only
 
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Created: Fri, 26 Nov 2010, 11:01:00 EST by Muhammad Noman Ali on behalf of The University of Queensland Library