The origin of the money, endogeneity of money supply and balance of payments: Post Keynesian approach

Discussions about the origin of the money object are represented in two separate streams as orthodox and heterodox. Orthodox flow is expressed as a Metallist approach while looking at money as a means of exchange, heterodox flow is called Cartalist and emphasizes the phenomenon of authority in the object defined as money. Orthodox current sees the money supply as an inventory and external variable that can be increased and decreased by the central bank (CB) according to the money holding preferences of the people and money is demanded only for transaction purposes. The Mundell-Fleming Model (MFM), which is included in this flow and adds the balance of payments to analysis, accepts the money supply only endogenously in the fixed exchange rate system. The aim of this study is to explain the endogenity of money supply in an open economy within the framework of Post Keynesian economics (PKI), which is based on the fact that the investment and production process takes place in a purely monetary economy. In this framework, compensation thesis which provides an alternative explanation for open economies has brought about a new expansion that is completely different from the MFM. In this expansion, two types of financial systems are defined as overdraft and asset-based. The endogeneity of the money supply in both systems in the PK can continue to be valid. These opinions oppose the endogeneity approach of the money supply discussed in MFM, and concurrently, the externality of the money supply which exists in the flexible exchange system is not accepted.