Further insights on endogenous money and the liquidity preference theory of interest

Figures & data

Table 1. Balance sheet matrix.

Households		Firms	Banks	Government	Central Bank	Σ
Bank deposits	+M		−M			0
Reserves			+H		−H	0
Commercial paper	+CP	−CP				0
Bank loans		−L	+L			0
Treasury bills	+GBh			−GB	+GBcb	0
Inventories		+INV				+INV
Σ	Vh	Vf	Vb	Vg	0	+INV

Table 2. Transactions flow matrix.

Households		Firms Current	Capital	Banks	Government	Central Bank	Σ
Consumption	−C	+C					0
Inventory Investment		+ΔINV	−ΔINV				0
Government Spending		+G			−G		0
Taxes		−T			+T		0
Wages	+WB	−WB					0
Distr. firm profit	+Ff	−Ff					0
Distr. bank profit	+Fb			−Fb			0
Distr. CB profit					+Fcb	−Fcb	0
Interest on com. paper	+rcp,−1 CP−1	−rcp,−1 CP−1					0
Interest on loans		−rl,−1 L−1		+rl,−1 L−1			0
Interest on bills	+rgb,−1 GBh,−1				−rgb,−1 GB−1	+rgb,−1 GBcb,−1	0
Interest on deposits	+rm,−1 M−1			−rm,−1 M−1			0
Interest on reserves				+rh H−1		−rh H−1	0
(Saving)	(savh)	(0)		(0)	(savg )	(0)	0
Δ Deposits	−ΔM			+ΔM			0
Δ Com. paper	−ΔCP		+ΔCP				0
Δ Loans			+ΔL	−ΔL			0
Δ Bills	−ΔGBh				+ΔGB	−ΔGBcb	0
Δ Reserves				−ΔH		+ΔH	0
Σ	0	0	0	0	0	0	0

Figure 1. Effect of an increase in government expenditure.

Figure 2. Effect of an increase in the target inventory-to-sales ratio.

Figure 3. Effect of a decrease in the demand for commercial paper.

Figure 4. Effect of an exogenous increase in central bank treasury bill holdings.

Figure 5. Effect of an increase in the interest rate on reserves.

Table 3. Parameters and exogenous variables.

Parameter	Value	Parameter	Value	Parameter	Value
χ1	0.5	χ2	1000	τ	0.25
γ1	1.45	γ2	2.5	θ	0.5
α	1	ψ	0.5	α1	0.875
α2	0.05	ω	0.01	λ10	0.27727
λ11	2.5	λ12	1.25	λ13	1.25
λ14	0.2	λ20	0.45	λ21	1.25
λ22	2.5	λ23	1.25	λ24	0.2
g	200	rh	0.005	w	1

Table 4. Initial values.

Variable	Initial value	Variable	Initial value	Variable	Initial value
inv	1419.5887	INV	1419.5887	s	1028.2776
se3	1028.2776	YD	1242.4165	YD^e	1242.4165
Vh	3106.0411	rm	0.01	rl	0.02
rcp	0.02	M	1324.6626	CP	709.7943
GB	1696.6581	GBh	1071.5842	GBcb	625.0739
L	709.7943	H	625.0739

Note. All figures were created in R. All tables were created in Word.