Banking and creation of Money: the Post Keynesian Theory Case of Albania

Abstract

The Post Keynesian approach is one of the Keynesianism Schools, who aimed the endogeneity of money supply. The interest for the Post Keynesians (PK) began more than two decades ago, as a result of deregulation, financial liberalization and many issues raised for the determination of money supply. Monetarist and Keynesians stated that money supply is exogenously determined by the Central Bank (CB), while the Post Keynesians argued that money is determined endogenously as a result of economic activities. The study will be looking into the very concept of the endogenous money hypothesis as this is reflected by the Post Keynesian tradition. The paper will synthesize and compare the existing theoretical and empirical evidences, by exploring the nature of money. The study will test the Post Keynesian Theory based on the available data for the Albanian country. The findings are not generalized for other developing countries. They represent the support for the underlying theory based on the used data.