Money Supply Endogeneity: Evidence from the Dynamic Panel Data

• Main Authors: Nayan, Sabri, Kadir, Norsiah, Yusof, Ab. Aziz, Mohammad Ali, Azilah
• Format: Article
• Published: Springer 2016
• Online Access: http://repo.uum.edu.my/24684/

In the discussion on monetary economics in general and the supply of money in an economy in particular, one cannot avoid mentioning one major concept, i.e. the money supply endogeneity. Money supply is said to be endogenous or endogenously determined if money creation occurs within the monetary system of an economy - rather than being determined by external forces. The theory of endogenous money represents the foundation of post-Keynesian monetary theory. Money supply endogeneity implies that central banks do not exogenously determine the quantity of credit money in existence; it is the interest rate that they can control exogenously. The present paper examines the money supply endogeneity based on a panel data set of 174 countries from year 2001 to 2011 utilising the dynamic panel data analysis and has found that money supply is endogenous as proposed by post-Keynesian theorists.