Growth and income distribution in a credit-money economy: Introducing the banking sector into the linear production model

This paper attempts to incorporate the Post-Keynesian view of the endogenous money supply into the Sraffian linear production model. The framework presented here unifies some key contributions made by Sraffa (the price equations), Kaldor and Kalecki (the endogenous nature of money in the industrial economy and the framework of the institutional theory of income distribution) and Keynes (liquidity preference and the concept of the 'own rates of interest' with its implication for the long-period position). Two different positions in the endogeneity view-the 'accommodationist' and the 'structuralist'-are classified in terms of method of selecting exogenous and endogenous variables. In this way, we hope to show that credit and money can play an essential role-from the demand and/or the supply side-by having a permanent impact on the growth path and the state of income distribution of an economy.