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

While we fully accord with Moore’s main themes, there are three of his arguments that we would not fully subscribe to: This curious disjunction between theory and practice predates the enthusiasm of the s for monetary targets. Finally, inthe Fed implemented a 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.

Nonetheless, theoretical analyses of monetary policy have until recently almost invariably characterised policy in terms of a path for the money supply, and discussions of policy rules in the theoretical literature have mainly considered money-growth rules of one type or another.

Under the influence of Paul Davidson, Moore began to develop his views on monetary macroeconomics, primarily as a response to the dominant paradigm of Friedman’s monetarism. 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.

Sign in to annotate. No one appears responsible. Scrutinizing the Fed’s operating procedures of previous decades, Moorep.

Horizontalists and Verticalists: 25 years later

More Contact us Publish with us Subscribe. The supply of credit money is endogenous, is demand-determined, and only its price can be controlled by the central bank, not its quantity. The last major monograph on monetary theory, Woodford is already fully aligned with Moore’s observations from 15 years earlier. This content is available to you. The verticalist paradigm may apply in a world of commodity or pure fiat money.


These worries were largely confirmed by the developments that led to the financial crisis of — and the need for central banks to massively intervene to substitute for the drying-out of short-term capital market funding sources.

It states that an increasing demand horizontalizts 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. Festschrift in Honor of Basil J. His thesis dealt with the effects of monetary policy on bank earnings. But Moore’s goal gradually comes closer.


In our opinion, these criticisms were at the core of Moore’s reasoning. The online content platform for Edward Elgar Publishing. In contrast, we believe that the idea of a natural rate of interest does not put into question the possibility that the verticaliste bank controls the actual money rate. It is remarkable that a book that must have appeared rather provocative when it was published has been corroborated so unambiguously by actual developments in policymaking within such a short period of time.

It postulated nothing less than the failure of a key assumption taken for granted by almost every monetary macroeconomist in the twentieth century: In verrticalists 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 horizojtalists.

He spent his first sabbatical with John Gurley and Edward Shaw in Stanford who, inhad written their influential monograph, Money in a Theory of Finance. Search Google Scholar Export Citation. More than 2 decades before Friedman and Kuttner explained to the inclined reader of the Handbook of Monetary Economics how central banks do it — that is, steering the rates — Moore nailed it down in chapter 5 of his book.


For the social relationship of Horizontalism, see Horizontalidad.

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

This economics -related article is a stub. The developments since then have corroborated his theory and his views in a remarkable way. IrwinHomewood, IL Virtually everything written in the monetary, macro- and growth literature — [is] either mis-specified or incomplete. Although we have to admit that neither of us is much acquainted with the post-Keynesian literature, we believe that the Festschrift edited horizontlists Setterfield is evidence enough of Moore’s influence in this field of economics.

Given the central bank’s control over the money rate, there is no natural convergence process of the actual money rate to the real rate.

Since the control of interest rates takes place through financial transactions which have a balance sheet representation, it provides discipline to explicitly write down these transactions and how they feed through the financial system in a closed system of T-accounts. One of us UB has to acknowledge that he himself largely overlooked Moore, in Bindseil a and b.

Print Save Cite Email Share. Thus credit money created by private banks can be seen to be leveraging of those reserves without the guidance of a particular leverage ratioi. A student of neoclassical Horuzontalists Fritz Machlup, Basil Moore became interested in money and banking very early in his career. You can help Wikipedia by expanding it. However, this should, in our view, not vertcialists one from learning from nineteenth-century monetary policy implementation techniques.

Robert Lucas had issued his critique on econometric policy evaluation 12 years earlier and thereby triggered the avalanche of micro-based macroeconomics that still prevails today.