Money supply endogenity in Turkey: An econometric study

The conventional money demand literature has treated the money supply as exogenous given. It is well known, however, that some endogenity of the money supply arises due to financial innovations and endogenous monetery policy. The evolving Post Keynesian endogenous approach to money offers a clear alternative to the Orthodox, neoclassical approach.Over the last two decades, work on the Post Keynesian theory of endogenous money has flousrishing, and has promped a rethinking of complex nature of money in modern economies. There is many differences between accommodationist and structuralist approach in Post Keynesian Theory. According to the accommodationist approach, the credit-money supply responds endogenously to changes in firms? demand for working capital.Structuralists separate from accommodationists because structuralists take note of the financial instability, the role of Central Bank in the economy, financial innovations, financial liberalisation and development of the information-communication Technologies. According to the structuralists these factors contributes positively to the endogenous money creation process.The discussion between structuralists and accommodationists may be important for both theoretical and policy reasons. Overall, showing that money is endogenous is important in particular for Post-Keynesians, since it will help to put the role of Central Banks and other monetary institutions, as well as financial innovations, in their theoretical perspective.This study examines the money endogenity process theoretically and progress in the financial area, especially after 1980s in Turkey. This study is aimed to explore the causality between bank credit and deposits in Turkey for the perios 1986-2009.