This paper will show the endogenous channel of monetary policy under a Sraffian context. That is, assuming a distributive variable as exogenous. In this case we say that the interest rate is determined by constitutional features and is set exogenously by the central bank to the level that it wants.
In this scheme, banks have a central role. The possibility of extending credit without the need for prior deposits, makes them a key driver of economic growth. Since the loan amount is determined by the demand for credit rather than deposits, the concept of effective demand cannot be dissociated from the analysis.
The implications of monetary and fiscal policy should also not be ignored.
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