2007 | OriginalPaper | Buchkapitel
The Dynamic Analysis of Monetary Policy Shock on Banking Behaviour
verfasst von : Edwin Le Heron
Erschienen in: Issues in Finance and Monetary Policy
Verlag: Palgrave Macmillan UK
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In Keynes’s General Theory, the ‘monetary authorities’ are considered to act as a deus ex machina: they should resolve all the problems regarding the creation and control of money. The banking system and financial institutions are analysed solely in terms of central bank activities.1 The supply of money is fixed exogenously by the central bank. An endogenous theory of the demand for money co-exists with an endogenous theory of the interest rate (liquidity preference).2