The endogenous money and the sustainability of the dollar regime: A post-Keynesian analysis
JEL Codes: E00, E10, E12, E51.
DOI:
https://doi.org/10.53591/8ksh7250Keywords:
Monetary endogeneity, circuits monetary, post-Keynesian theory, monetary policyAbstract
This study analyzes the impact of domestic currency on the long-term viability of Ecuador's dollarization policy. The post-Keynesian approach is employed to examine the interaction between the real and monetary sectors. It has been posited that, despite the nation's loss of autonomy in issuing its own currency, the domestic financial system, particularly commercial banks, assumes a pivotal role in the creation of money through the facilitation of credit. The present research employs a qualitative approach, underpinned by theoretical and analytical frameworks, augmented by the application of descriptive statistics. The analysis utilizes data from the Central Bank of Ecuador, encompassing liquidity, GDP, and credit extended to the private sector. The findings indicate that endogenous money creation has contributed substantially to economic growth, even in the absence of monetary sovereignty. It has been determined that the Central Bank, even within a dollarized framework, possesses the capacity to employ instruments such as reserve requirements and the base interest rate, thereby exerting its influence on the broader economic landscape. Consequently, the efficacy of an active monetary policy in economies lacking their own currency is reinforced.
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