Pénz és kamat. A monetáris politika megújítása. (Money and Interest Rate. A New Approach to Monetary Policy)
Prosperitas Monográfiák, Budapest Business School (2019)
198 Pages Posted: 23 Sep 2019 Last revised: 13 Oct 2020
Date Written: January 8, 2019
Hungarian Abstract: A hagyományos közgazdaságtan a reálelemzés keretében érvel, és ez akadálya a valós gazdasági folyamatok megértésének. Schumpeter és Keynes kritizálta ezt a megközelítést és helyette a monetáris elemzést alkalmazta. Ezt az elméleti alapvetést követem, amikor megkérdőjelezem a kamatpolitika hagyományos felfogását. A könyvben a pénz és a kamat egy új elméletét ismertetve megmutatom, hogy a kamat természetes rátájának klasszikus fogalma nem ad támpontot a monetáris politika számára. Az endogén pénzelmélet jut el ahhoz a felismeréshez, hogy a pénzteremtésben a kereskedelmi bankok hitelezése a döntő jelentőségű, és ezzel a jegybank szerepe háttérbe szorul ezen a téren. A pénzteremtés irányítását a központi bank napjainkban már nem kizárólag a kamatpolitika alakításával gyakorolja, hanem a hitelezésnek a bankok pénzügyi stabilitási és likviditási szabályozásán keresztül valósítja meg. A jegybank ugyanakkor a reálkamathoz fűződő téves hiedelmektől megszabadítva meghatározó szerepet játszik a kamatok alakításában.
English Abstract: Neoclassical economics uses real analysis and this approach limits its applicability to practical economic problems, including policy applications. Joseph Schumpeter and later John Maynard Keynes himself rejected the approach of real analysis and the notion of money neutrality. They argued that to understand the changes in the economy requires closer reflection of the crucial importance of credit and money. Schumpeter and Keynes promoted monetary analysis as the proper method to analyze the modern economy. This book joins their instructive criticism by raising doubts about the traditional views on interest rate. We deal with a new theory of money and interest rate and I show that Wicksell’s classical concepts of the natural (real equilibrium) rate of interest would not give guidance for contemporary monetary policy practitioners. These terms are unobservable. The natural rate apparently became unstable after the global financial crisis. Such concepts of interest rates are key variables of real analysis, but they are inherently uncertain, and imprecise. There is a growing dissatisfaction with traditional macroeconomic approaches based on the notion of money neutrality in real analysis.
The endogenous theory of money highlighted the importance of money created by commercial bank credit. The central bank’s presumed control over money became questionable. Central banks determine interest rates (short term and nominal) but the quantity of money is determined endogenously. Macroprudencial and liquidity requirement regulations -- which are important factors in influencing commercial bank lending and endogenous money creation -- became the most important instrument the central bank can use to control money.
With respect to money creation, we distinguish between inside and outside money. Inside money is created by the private sector’s need for money helped with bank credit. Outside money is created by the state (not the private sector), but its creation is indirectly influenced by the money demand of the private sector.
We give a brief overview of the historical process of the emergence of money by comparing the main elements of the chartalist and metallist concepts of money. Concerning the current debates about the role of banks in money creation we compare three alternative theories of banking. All three are in conflict with each other in explaining even the basic facts, and yet still they live in peaceful coexistence in textbooks. These three theories treat the role of banks in money creation differently. According to one of the theories, banks simply act as intermedieries in channelling savings to borrowers, and play no part at all in money creation. Another set of theories maintains that individual banks are unable to create money, since they cannot print banknotes, but the banking system as a whole can create money in a manner governed by the central bank by the money multiplier process. According to the third theory banks may create money independently from the central bank endogenously through credit creation. The description of today’s money flows and the interpretation of today’s monetary policy is only possible through the endogenous money theory.
Globally important central banks will increase their interest rate eventually. However, at low interest rates a relatively small increase may lead to significant losses in portfolios with longer duration. Investment funds in their effort to minimize losses by shortening the duration of their portfolios may trigger abrupt changes in capital flows. Increased volatility may undermine financial stability. This type of stability risk is independent of the country’s liquidity situation or weather the banks are well capitalized or profitable. Such systemic risks cannot be managed by macroprudential tools but these tools remain an integral part of monetary policy management.
Note: Downloadable document is in Hungarian.
Keywords: Endogenous Money, Interest Rate, Money Multiplier, Monetary Policy, Post-Keynesian, Macroprudential Regulation
JEL Classification: E12, E43, E51, E52, E58, G28
Suggested Citation: Suggested Citation