Intermediation, Money Creation, and Keynesian Macrodynamics

Bill GibsonMark Setterfield
Written By SCEPA

WORKING PAPER

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Using a multi-agent systems model, this paper shows that real economies, especially those subject to recurrent financial crises, can be neither horizontalist nor verticalist.

Horizontalism overlooks microeconomic factors that might block flows from savers to investors, while verticalism ignores an irreducible ability of the system to generate endogenous money, even when the monetary authority does everything in its power to limit credit creation.

SCEPA
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