RETHINKING ENDOGENOUS MONEY: A CONSTRUCTIVE INTERPRETATION OF THE DEBATE BETWEEN HORIZONTALISTS AND STRUCTURALISTS

Beyond a widespread agreement on the idea that 'loans create deposits' and 'deposits make reserves', there is much controversy in the endogenous money literature over the workings of the reserve market, the credit market and the financial markets. In this paper a constructive interpretation of the debate between horizontalists and structuralists is suggested and their arguments are taken forward by showing that these controversial issues can be explained rigorously once a single-period-continuation framework is adopted. Copyright Blackwell Publishing Ltd 2004.