The Characteristics of a Monetary Economy: A Keynes-Schumpeter Approach

Posted: 16 Jun 2008  

Giancarlo Bertocco

affiliation not provided to SSRN

Date Written: January 2007


Mainstream monetary theory considers money only as an instrument meant to facilitate trading without having any effect on income or on the evolution of the economic system. The aim of this paper is to elaborate a monetary theory capable of supporting the thesis of money non-neutrality based on the arguments developed by Keynes and Schumpeter. The synthesis of the theories of these two great economists will be formulated starting from the two points which are common in the views of Keynes and Schumpeter. First, in contrast with mainstream theory, Keynes and Schumpeter state that the diffusion of a fiat money induces a radical modification into the way in which the economic system works. Second, when Keynes and Schumpeter describe the reasons why money and financial aggregates are not neutral, they highlight the fundamental role of the credit market and of banks; in contrast with the mainstream theory, they do not consider the credit market as the mirror image of the goods market.

Keywords: Money non-neutrality, Bank money, Credit

JEL Classification: E12, E40, E44, G21

Suggested Citation

Bertocco, Giancarlo, The Characteristics of a Monetary Economy: A Keynes-Schumpeter Approach (January 2007). Cambridge Journal of Economics, Vol. 31, Issue 1, pp. 101-122, 2007. Available at SSRN: or

Giancarlo Bertocco (Contact Author)

affiliation not provided to SSRN ( email )

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