Money supply and interest rate in recent macroeconomic conceptions





Monetary theory, volume of money, monetary authorities, public behaviour, Italy, deposits, banking system, credit, Central Bank, notes


The article falls into two parts. The first takes issue, within the framework of the Keynesian system, with the point made in much of the literature on monetary theory that the total volume of money is determined almost exclusively by the monetary authorities. The author reasserts his own view that an important influence is exerted by the behaviour of the public. The second part describes the methodology and results of a statistical investigation of Italy establishing the weight in the determination of the volume of deposits of three elements: the behaviour of the public as regards the credit it extends to the banking system; the conduct of the banks as regards the credit they extend to the public; and the policy of the monetary authorities regarding the creation of claims on the Central Bank. The author concludes that the results confirm the view that the amount of money is highly sensitive to changes in the proportion of money that the public holds in the form of notes.


JEL: E43, E51, E52, E58


How to Cite

GAMBINO, A. (2014). Money supply and interest rate in recent macroeconomic conceptions. PSL Quarterly Review, 7(30).