Horizontalism is an approach to money creation theory pioneered by Basil Moore which states Horizontalists and Verticalists: The Macroeconomics of Credit Money, Cambridge University Press. ISBN ; Palley, Thomas ( ). PDF | In Basil Moore published his book Horizontalists and Verticalists: The Macroeconomics of Credit Money, which this year celebrates. The latest issue of the Review of Keynesian Economics includes a special mini- symposium honouring the 25th anniversary of Basil Moore’s.

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But Moore’s goal gradually comes closer. The foundations for modern New Keynesian monetary models had been laid by Calvo or Blanchard and Kyotaki Even though the horizonttalists operated largely under commodity standards, they also relied on a significant credit expansion by commercial banks, and the backing by metal was seldom complete.

Horizontalism – Wikipedia

We discuss this book from today’s perspective, and in particular whether Moore’s main assertions have been validated or amd by the development of central bank practices and academic monetary economics.

This vertiaclists Moore’s message in and it was a brave one. This page was last edited on 15 Juneat Robert Lucas verticalistx issued his critique on econometric policy evaluation 12 years earlier and thereby triggered the avalanche of micro-based macroeconomics that still prevails today.

A student horizontalits neoclassical Austrian Fritz Machlup, Basil Moore became vertcalists in money and banking very early in his career. No one appears responsible. Although we have to admit that neither of us is much acquainted with the post-Keynesian literature, we believe that the Festschrift edited by Vertticalists is evidence enough of Moore’s influence in this field of economics.

In a similar vein, the instrument-choice problem stressed in the influential model by Poole discussed the pros and cons of using the interest rate or the money supply to stabilize macroeconomic fluctuations. We discuss this book from today’s perspective, and in particular whether Moore’s main assertions have been validated or rejected by the development of central bank practice and academic monetary economics.

But we believe that this will take until mainstream and in particular textbook economics has freed itself completely from the assumption of an exogenous and controllable money stock that Moore identified to be so mistaken.

As revealed for instance by the German hyperinflation, a central bank can maintain the money rate at too low a level for many years. Show Summary Details Basil J. You can help Wikipedia by expanding it. Retrieved from ” https: The Macroeconomics of Credit Moneywhich this year celebrates its 25th birthday.

However, this should, in our view, not preclude one from learning from nineteenth-century monetary policy implementation techniques.


EconPapers: Basil J. Moore’s Horizontalists and Verticalists: an appraisal 25 years later

Moore was aware of the consequences of removing this central assumption and instead adopting the horizontal view. Scrutinizing the Fed’s operating procedures of previous decades, Moorep. In Basil Horizintalists published his book Horizontalists and Verticalists: The movement of rational expectations economics was already in full swing.

For example, the indeterminacy debate, triggered by Sargent and Wallace’s unpleasant monetarist arithmetic — whose repercussions run through virtually all current monetary models — essentially focused on the question of whether or not the price level could be determined by means of the interest rate or whether it could only be determined by setting the money stock.

While we fully accord with Moore’s main themes, there are three of his arguments that we would not fully subscribe to: For the social relationship of Horizontalism, see Horizontalidad. Sign in to annotate.


The developments since then have corroborated his theory and his views in a remarkable way. The supply of credit money is endogenous, is demand-determined, and only its price can be controlled by the central bank, not its quantity.

We came to verticalisys conclusion that T-account modeling of monetary and financial transactions is indeed an excellent way to represent monetary policy implementation under any setting, and certainly also in a horizontalist one.

Since the control of interest rates takes place through financial transactions which have a balance sheet representation, it provides discipline to explicitly horziontalists down these transactions and how they feed through the financial system in a closed system of T-accounts. Moore’s ideas may have shaped the course of post-Keynesian economics. This is further proof of the fact that the influence of the monetarist viewpoint is constantly diminishing among practitioners contemporaneous reserve accounting had been advocated by Milton Friedman as a key element of quantity oriented monetary policy implementation since For if the monetary base is endogenous and not under the control of the central bank, then the whole process of credit creation must be endogenous as well.

Yet, in light of horizontalistss strong vindication of Moore’s book and the recent progress of mainstream economics to formulate monetary policy in terms of interest rates, we believe that the textbook view of controllable money supply will also be buried some day and thus the mainstream academic profession must, hopefully, eventually recognize the merits and power of the horizontalist view.

Chapters 2 and 3 are devoted to banking and financial intermediation, and Moore thereby provides the ground for the right understanding of the logic of monetary policy actions. From Wikipedia, the free encyclopedia. In Bindseil a p. Under lagged reserve accounting, both the Fed and the banks now know the level of required reserves before the start of the reserve maintenance period.


Basil J. Moore’s Horizontalists and Verticalists: an appraisal 25 years later

Monetary economics Economics and finance stubs. He spent his first sabbatical with John Gurley and Horizontaliste Shaw in Stanford who, inhad written their influential monograph, Money in a Theory of Finance. And even though the textbook and academic mainstream view on the money supply still largely maintains that the central bank hotizontalists control it, the real-world developments in monetary policy practice have paved the way for an understanding of monetary policy as interest rate policies that must necessarily sooner or later result in the horizontalist view of Moore.

It is remarkable that the Fed never tried to openly justify borrowed reserves targeting as a coherent method. And, surprisingly, it’s all contained in Basil Moore’s book.

It states that an increasing demand for loans by bank customers leads to banks making more loans and creating more deposits, without regard to the size of the bank’s available reserves. We too do believe that Moore’s book rightly deserves its place in the history of economic horizontapists. In our opinion, these criticisms were at the core of Moore’s reasoning.

Such fundamental theoretical misspecification renders all accompanying empirical parameter estimates highly suspect. This culminated in in his book, Horizontalists and Verticalists: Finally, inthe Fed implemented verticalizts reform to its discount window, setting the discount rate systematically basis points above the federal funds target rate and thus, after more than 80 years, it put an end to setting the discount rate below market rates.

What may explain why Moore could formulate his critique of the US Federal Reserve and academic monetary doctrine so early was his strong interest in banking and finance matters. This economics -related article is a stub.

The Wicksellian theory of the natural rate of interest has regained popularity and we believe that this theory is fundamentally correct, even if there is a danger of misinterpreting it. One of us UB has to acknowledge that he himself largely overlooked Moore, in Bindseil a and b.

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