THE TREATMENT OF MONEY IN REGIONAL ECONOMICS

ABSTRACT. A survey of regional monetary theory suggests a regional segmentation of financial markets on the basis of differences in portfolio preference, or market imperfections. These possibilities are explored here using post‐Keynesian monetary theory. It is concluded that the availability of credit to a region depends more on the (potentially volatile) degree of confidence in the regional economy. The amount of liquidity thus generated depends on the propensity for capital flight due to liquidity preference. The resulting tendency for regions attracting low degrees of confidence to experience liquidity shortage will be greater the more integrated the national banking system.