The Endogenous Money Approach

5 Pages Posted: 28 Jan 2014

See all articles by L. Randall Wray

L. Randall Wray

University of Missouri at Kansas City; Bard College - The Levy Economics Institute

Date Written: August 1, 2001


In neoclassical theory, money is an exogenous variable: Money is neutral, merely determining nominal prices; and the supply of money is controlled by the central bank.

This paper delineates how Post Keynesians offer a clear alternative to the neoclassical approach. Topics discussed include: early Post Keynesian work, which emphasized uncertainty and money hoarding; circuit theory, which focused on money's role in financing spending; horizontalism, which pointed out the inability of the central bank to control reserves; endogenous money; neo-Chartalism, which looks at the role of the state in designating a unit of account for taxes and other monetary obligations; functional finance, which refuses to separate fiscal and monetary policy; the failure of monetary policy to affect unemployment; and the use of fiscal policy, via a government "buffer stock" of labor, to reduce unemployment.

Keywords: endogenous money, circuit theory, horizontalism, neo-Chartalism, functional finance, unemployment, buffer stock of labor

Suggested Citation

Wray, L. Randall, The Endogenous Money Approach (August 1, 2001). Available at SSRN: or

L. Randall Wray (Contact Author)

University of Missouri at Kansas City ( email )

5100 Rockhill Road
Kansas City, MO 64110-2499
United States

Bard College - The Levy Economics Institute

Annandale-on-Hudson, NY 12504-5000
United States

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