E59 - Monetary Policy, Central Banking, and the Supply of Money and Credit: OtherReturn

Revision of Marc Lavoie's Monetary Model by the Endogenization of the Parameter γ This paper tries to point out a fallacy in Lavoie's (2006) conclusion that incorporation of deep endogeneity of parameters into the PKA model suffices to bring about irreversibility of such a system. The arguments of the authors are supported by Setterfield's (1998a, 2008) concept of hysteresis as path-dependence in the long-run outcome of systems with direct shocks. The paper shows that extension of Lavoie's PKA model by deep endogeneity of the parameter γ causes the fulfillment of the necessary condition of hysteresis - Setterfi eld's condition (a) ensuring deep endogeneity of the alleged exogenous parameter and, by means of this, path dependence in the long-run output - but not the fulfi llment of the sufficient condition of hysteresis - condition (c) ensuring the presence of adjustment asymmetry and, by means of this, irreversibility. Thus, deependogenisation of the parameter γ does not bring about Setterfi eld's hysteresis and, in effect, does not cause irreversibility.

During 1930s and 1940s Josef Macek developed monetary theory leading to monetary policy recommendations which are deeply influenced by macroeconomic theory of John Maynard Keynes. Macek became leading Czech left-wing keynesian. His theory of money was nominalist and similarly to J. M. Keynes and G. Cassel he elaborated the concept of managed fiat money. He critisized and disapproved the quantity theory of money. In his monetary theory and his monetary policy conclusions he was a forerunner of contemporary post-keynesian monetary theories. Money supply is in his monetary theory highely endogenous and he expressed certain doubts about effeciency of monetary policy measures as antirecessionary remedy.