A Model with Private Bank Money, Inventories and Inflation

  • Wynne Godley
  • Marc Lavoie


The present chapter applies the accounting lessons and the pricing behaviour that we discussed in Chapter 8. A preliminary model describing a closed economy with no government is deployed, based on ‘inside’ money created by banks. After having explored its main features, we will be able to move on to two more realistic models of a whole modern industrial monetary economy, those of Chapters 10 and 11, that deal simultaneously with privately issued money and government-issued money.


Real Wage Real Income Consumption Function Monetary Economic Unit Labour Cost 
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Copyright information

© Wynne Godley and Marc Lavoie 2012

Authors and Affiliations

  • Wynne Godley
    • 1
  • Marc Lavoie
    • 2
  1. 1.King’s CollegeCambridge UniversityCambridgeUK
  2. 2.Department of EconomicsUniversity of OttawaCanada

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