Horizontalism is an approach to money creation theory pioneered by Basil Moore which states Horizontalists and Verticalists: The Macroeconomics of Credit Money, Cambridge University Press. ISBN ; Palley, Thomas ( ). PDF | In Basil Moore published his book Horizontalists and Verticalists: The Macroeconomics of Credit Money, which this year celebrates. The latest issue of the Review of Keynesian Economics includes a special mini- symposium honouring the 25th anniversary of Basil Moore’s.

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EconPapers: Basil J. Moore’s Horizontalists and Verticalists: an appraisal 25 years later

For if the monetary base is endogenous and not under the control of the central bank, then the whole process of credit creation must be endogenous as well. The Wicksellian theory of the natural rate of interest has regained popularity and we believe that this theory is fundamentally correct, even if there is a danger of misinterpreting it. The Macroeconomics of Credit Moneywhich this year celebrates its 25th birthday.

Moore BasilHorizontalists and Verticalists: It is remarkable that the Fed never tried to openly justify borrowed reserves targeting as a coherent method. In a similar vein, the instrument-choice problem stressed in the influential model by Poole discussed the pros and cons of using the interest rate or the money supply to stabilize macroeconomic fluctuations. No one appears responsible.


One of the reasons why Moore may have devoted relatively little attention to the nineteenth century is his correct remark that commodity money is not the same as credit money, and that David Hume’s quantity theory was indeed appropriate as a theory for a commodity standard.

By using this site, you agree to the Terms of Use and Privacy Policy. As a last side remark, Moore associates the representation of the central bank and the banking system in T-accounts with monetary base targeting and the money multiplier doctrine, and therefore rejects its usefulness.

A student of neoclassical Austrian Fritz Machlup, Basil Moore became interested in money and banking very early in his career. In our opinion, these criticisms were at the core of Moore’s reasoning. Although we have to admit that neither of us is much acquainted with the post-Keynesian literature, we believe that the Festschrift edited by Setterfield is evidence enough of Moore’s influence in this field of economics.


Thus credit money created by private banks can be seen to be leveraging of those reserves without the guidance of a particular leverage ratioi. While we fully accord with Moore’s main themes, there are three of his arguments that we would not fully subscribe to: Given the central bank’s control over the money rate, there is no natural convergence process of the actual money rate to the real rate.

IrwinHomewood, IL For us, the only plausible explanation may be that Moore’s message is formulated so vigorously that it still appears overly provoking to many.

It is even more remarkable that he warns already in against the increasing liquidity and financial stability risk relating to the issuance of short-term debt instruments by banks. Horizontailsts Summary Details Basil J.

Horizontalism – Wikipedia

Nonetheless, theoretical analyses of monetary policy have until recently almost invariably characterised policy in terms of a path for the money supply, and discussions of policy rules in the theoretical horizontalistss have mainly considered money-growth rules of one type or another.

We too do believe that Moore’s book rightly deserves its place in the history of horizontaliats thought. Scrutinizing the Fed’s operating procedures of previous decades, Moorep. Festschrift in Honor of Basil J. The online content platform for Edward Elgar Publishing. It states that an increasing demand for loans by bank customers leads to banks making more loans and creating more deposits, without regard to the size of the bank’s available reserves.

What may explain why Moore could formulate his critique of the US Federal Reserve and academic monetary doctrine so early was his strong interest in banking and finance matters. The heritage left by his book, the intellectual deepness of his thoughts, and the clarity with which his ideas were put forward have, in our view, made Horizontalists and Verticalists a key contribution to monetary economics.

The recent writings of, for example, Godley and Lavoie confirm this point of view. The foundations for modern New Keynesian monetary models had horizonralists laid by Calvo or Blanchard and Kyotaki The developments since then have corroborated his theory and his views in a remarkable way. Sign in to annotate. This book has stood the test of time and is still a must-read for anyone interested in understanding the functioning of the monetary system and the relationship between the banking and financial sector and the central bank.


Retrieved from ” horizontalishs Horizontalism influenced monetary circuit theorists to develop the endogenous money approach that was already nascent within Post-Keynesian academic thought. European Journal of Economics and Economic Policies: Print Save Cite Email Share. It postulated nothing less than the failure of a key assumption taken for granted by almost every monetary macroeconomist in the twentieth century: The last major monograph on monetary theory, Woodford is already fully aligned with Moore’s observations from 15 years earlier.

The supply of credit money is endogenous, is demand-determined, and only its price can be controlled by the central bank, not its quantity. Instead reserves will be provided on demand at the bank rate set by the central bank.

Monetary economics Economics and finance stubs. Under lagged reserve accounting, both the Fed and the banks now know the abd of required reserves before the start of the reserve maintenance period. But we believe that this will take until mainstream and in particular textbook economics has freed itself completely from the assumption of an exogenous and controllable money stock that Moore identified to be so verticwlists.

Chapters 2 and 3 are devoted to banking and financial intermediation, and Moore thereby provides the ground for the right understanding of the logic of monetary policy actions. Under the influence of Paul Davidson, Moore began to develop his views on monetary macroeconomics, primarily as a response to the dominant paradigm of Friedman’s monetarism.

This page was last edited on 15 Juneat You can help Wikipedia by expanding it. His thesis dealt with the effects of monetary policy on bank earnings.