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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Horizontalism – Wikipedia

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.

While we fully accord with Moore’s main themes, there are three of his arguments that we would not fully subscribe to: Horizontalism is an approach to money creation theory pioneered by Basil Moore which verticalistw that private bank reserves are not managed by central banks.

In our opinion, these criticisms were at the core of Moore’s reasoning. 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 practices and academic monetary economics.

Moore Basil horlzontalists, Horizontalists and Verticalists: This inverts the mainstream textbook money multiplier relationship between deposits and loans since loans are said to cause deposits which in vsrticalists cause reserves.

It is even more vfrticalists that he warns already in against the increasing liquidity and financial stability risk relating to the issuance of short-term debt instruments by banks. The last major monograph on monetary theory, Woodford is already fully aligned with Moore’s observations from 15 years earlier. More Contact us Publish with us Subscribe. The recent writings of, for example, Godley and Lavoie confirm this point of verticalistw. 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.


However, this should, in our view, not preclude one from learning from nineteenth-century monetary policy implementation techniques. The movement of rational expectations economics was already in full swing.

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. 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.

Retrieved from ” https: This culminated in in his book, Horizontalists and An Sign in to annotate.

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

Virtually everything written in the monetary, macro- and growth literature — [is] either mis-specified or incomplete. Obviously this policy parameter does not have a natural tendency to correct itself. We too do believe that Moore’s book rightly deserves its place in the history of economic thought. And even though the textbook and academic mainstream view on the money supply still largely maintains that the central bank can 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.

One of us UB has to acknowledge that he himself largely overlooked Moore, in Bindseil a and b. 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. Monetary policy decision making almost everywhere means a decision about the operating target for an overnight interest rate, and the increased transparency about policy in recent years has almost meant greater explicitness about the central bank’s interest-rate target and about the way in which its interest-rate decisions are made….

It was a time when mainstream monetary economics had already experienced fundamental changes that continue until today. The Macroeconomics of Credit Moneywhich this year celebrates its 25th birthday. The verticalist paradigm may apply in a world of commodity or pure fiat money.


More than 2 decades before Friedman and Kuttner explained horizontakists 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. Such fundamental theoretical misspecification renders all accompanying empirical parameter estimates highly suspect.

Under lagged reserve accounting, both the Fed and the banks now horizontapists the level of required reserves before the start verticaliss the reserve maintenance period. Horizontalism influenced monetary circuit theorists to develop the endogenous money approach that was already nascent within Post-Keynesian academic thought.

Thus credit money created by private banks can be seen to be leveraging of those reserves without the guidance of a particular leverage ratioi. Views Read Edit View history.

This book has stood the test of time and is still a must-read for anyone interested in understanding the functioning of the monetary system and the relationship between the banking and financial sector and the central bank. One of the reasons why Moore may have devoted relatively little attention to the nineteenth century is his correct remark that commodity money is not the same as credit money, and that David Hume’s quantity theory was indeed appropriate as a theory for a commodity standard.

Moore’s ideas may have shaped the course of post-Keynesian economics. Show Summary Details Basil J. For example, the indeterminacy debate, hodizontalists by Sargent and Horizonttalists unpleasant monetarist arithmetic — whose repercussions run through virtually all current monetary models — essentially focused on the question of whether verticalits 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.