A reasonable attempt to clarify what was accomplished via Mike Norman Economics
Edward Harrison — Endogenous or exogenous money?
I think the real difference between what Nick Rowe is saying and what people like Scott Fullwiler and Steve Keen are saying is that Nick believes over the medium-term, central bank interest rate policy is endogenous. What I think Nick means is that Scott Fullwiler’s view is reasonably clear and straightforward in his view that central monetary policy is exogenous but that it only matters over a short-term time horizon because central bank interest rate policy adjusts endogenously over the medium-term to commercial bank and other economic variables such that it is really endogenous rather than exogenous.
Read it at Credit Writedowns
Endogenous or exogenous money?
Tom Hickey writes:
When PKE and MMT economists say that money creation is endogenous and the Fed setting of the interest rate is exogenous, they mean that credit extension is determined in the market place through demand, while the Fed operates independently in setting rates. In the US, the overnight rate is not set in the overnight market by banks competing for available reserves. When the Fed does not manage the rate by paying IOR, it carefully manages quantity to target price using OMO, the issuance of tsys having already served as the major drain of excess reserves.
Is this all the kerfuffle is about? I don’t think so.
If CB interest rate policy is endogenous, how is it that the BoC can keep the rate at the same level for an extended period, as it is doing now? Or is the extended period of the “medium-term”?
Great work here, by the way.
I butchered my previous attempt at a comment…so here’s what I would ask Nick:
If CB interest rate policy is endogenous, how is it that the CB can keep the rate at the same level for an extended period, as we know it is able to do? Or is any ‘extended period’ always part of the “medium-term”?
Great work, Travis, by the way.