Title: Macroeconomics, endogenous money and the contemporary financial crisis: a teaching model

Authors: Giuseppe Fontana, Mark Setterfield

Addresses: Economics, LUBS, University of Leeds, Leeds, LS2 9JT, UK; Universita del Sannio, Via delle Puglie, 82, 82100 Benevento, Italy. ' Department of Economics, Trinity College, Hartford, Connecticut 06106, USA

Abstract: This paper develops an undergraduate macroeconomics teaching model that features endogenous money and an explicit account of commercial bank behaviour. It therefore transcends common shortcomings of existing teaching models based on either IS-LM or its successor, the New Consensus. The model is used to explain the recent financial crisis and its macroeconomic impact, and to analyse the effects and potential shortcomings of monetary and fiscal policy responses to the crisis.

Keywords: financial crisis; endogenous money; macroeconomics education; economics education; commercial banks; bank behaviour; teaching models; monetary policy; fiscal policy.

DOI: 10.1504/IJPEE.2009.028970

International Journal of Pluralism and Economics Education, 2009 Vol.1 No.1/2, pp.130 - 147

Published online: 16 Oct 2009 *

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