A Post-Keynesian view of money creation channels in modern economies: An empirical application on their causes and consequences

As a result of the conceptual and historical evolutions that money went through with its birth, a wide variety of market structures have emerged and the capitalism system has emerged. As a result of the financial innovations, increased banking activities and commercial and political ties between countries that accompany these developments, it is understood that economic relations have gained an endogenous tendency. Although there are approaches from different schools of economics in examining these economic relations, the views on money and money supply, especially the Neo-Classical School, which is considered as the mainstream in the literature, are heavily based on the externality of the money supply. However, financial innovations and implemented monetary policies ensure that the money supply becomes endogenous. The approach of the endogenousness of the money supply, emphasized by the Post Keynesian School, especially in terms of the role that credit money and banks play in the economy, constitutes a serious alternative to the mainstream schools of economics. In this context, studies on the Post Keynesian approach have also gained importance and the point of how money is created in modern economies has come to be addressed with the endogenous money supply approach. The aim of this study is to examine the money creation processes in the context of endogenous money supply within the framework of Post Keynesian theory for Upper Middle Income and High Income Countries during the period 1994–2022, and for OECD Countries during the period 1996–2022, using panel data analyses. The findings support the validity of the Post-Keynesian endogenous money supply approach.