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The Dynamic Analysis of Monetary Policy Shock on Banking Behaviour

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Issues in Finance and Monetary Policy

Abstract

In Keynes’s General Theory, the ‘monetary authorities’ are considered to act as a deus ex machina: they should resolve all the problems regarding the creation and control of money. The banking system and financial institutions are analysed solely in terms of central bank activities.1 The supply of money is fixed exogenously by the central bank. An endogenous theory of the demand for money co-exists with an endogenous theory of the interest rate (liquidity preference).2

I would like to thank Roy Rotheim and John McCombie for helping me with the translation.

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Authors
  1. Edwin Le Heron
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Editor information

Editors and Affiliations

  1. University of Cambridge, UK

    John McCombie (Director of the Centre for Economic and Public Policy, Fellow in Economics) (Director of the Centre for Economic and Public Policy, Fellow in Economics)

  2. Downing College, Cambridge, UK

    John McCombie (Director of the Centre for Economic and Public Policy, Fellow in Economics) (Director of the Centre for Economic and Public Policy, Fellow in Economics)

  3. University of the Basque Country, Spain

    Carlos Rodríguez González PhD (Lecturer in Economics) (Lecturer in Economics)

Copyright information

© 2007 Edwin Le Heron

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Heron, E.L. (2007). The Dynamic Analysis of Monetary Policy Shock on Banking Behaviour. In: McCombie, J., González, C.R. (eds) Issues in Finance and Monetary Policy. Palgrave Macmillan, London. https://doi.org/10.1057/9780230801493_5

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