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Preliminary communication

Transcending the new macroeconomic orthodoxy in the Eurozone: a Post-Keynesian view

Kristijan Kotarski orcid id ; Faculty of Political Science, University of Zagreb, Zagreb, Croatia
Milan Deskar-Škrbić orcid id ; Erste&Steiermarkische bank, Zagreb, Croatia

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page 419-441

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The main aim of this paper is to empirically test the endogenous money hypothesis
for the Eurozone. Based on data on loans to private sector, deposits, monetary
aggregates, prices and GDP we use three empirical approaches to test the
hypothesis: (i) moving correlation; (ii) Granger causality tests and (iii) original
framework for the analysis based on the structural VAR model. The empirical
results confirm our main hypothesis on the endogeneity of money in the Eurozone
as they show that the commonly accepted neoclassical relations between monetary
variables, inflation and economic activity are reversed in case of Eurozone and
that the direction of influence goes from loans to deposits and from real sector of
the economy towards the monetary sector. The basic conclusion from carried out
research is that ECB should implement measures directly aimed at stimulation of
domestic demand (monetary-supported tax cut).


Macroeconomic orthodoxy, eurozone, post-Keynesian approach, endogenous money, ECB

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Article data in other languages: croatian

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