The Endogenous Money Theory and the Characteristics of a Monetary Economy

The aim of the paper is to evaluate the importance of the endogenous money theory, and the criterion used is whether this theory enables us to elaborate on and to broaden the explanation of the non-neutrality of money formulated by Keynes in The General Theory. The thesis upheld in this paper is that the endogenous money theory allows us to put forward a sounder and more convincing explanation of the key characteristics of a monetary economy than the one based on the liquidity preference theory. In particular it allows us to explain in a more satisfactory way the two fundamental characteristics of a monetary economy: 1) a monetary economy is characterized by the presence of uncertainty; 2) in a monetary economy Say's law does not apply