THE ENDOGENOUS MONEY THEORY AND THE CHARACTERISTICS OF A MONETARY ECONOMY

The endogenous money theory constitutes the core element of the postKeynesian monetary theory. The aim of this paper is to evaluate the importance of the endogenous money theory and the criterion used to achieve this objective is to evaluate whether this theory enables us to elaborate on and to broaden the explanation of the non-neutrality of money formulated by Keynes. He defines the non-neutrality of money in his 1933 works in which he underlines the need to elaborate a monetary theory of production (Keynes 1933a, 408) and he uses the expression monetary economy to indicate an economic system in which the presence of money radically changes the nature of exchange and the characteristics of the production process with respect to the barter economy described by the classical theory. To maintain the thesis of the non-neutrality of money therefore means to show that the presence of money makes it possible to explain the characteristics which distinguish a monetary economy from a barter economy. In the General Theory the reasons for the non-neutrality of money are grounded in the store of wealth function of money; the liquidity preference theory is the element on which the Keynesian explanation of income fluctuations is based. Thus, in order to assess the importance of the endogenous money theory we must verify if this theory is an alternative to the liquidity preference theory or if the two theories are in some way complementary. And in the latter case, it must be determined whether the endogenous money the