The frequency and intensity of financial crises in the last decades have been a challenge for sustainable growth. The academic community is trying to find the way out by offering practical solutions. However, more and more issues are on the go because each crisis has different occasions induced by internal and external factors, which vary in their economic implications. There is an urgent need to develop an effective system of preventive measures based on early warning indicators. The indicators cover a great deal of economic activity but focus on the fundamental identities that are key elements of sustainable growth. One of those identities is a quantity equation of exchange. The modern interpretation of the Quantity Theory of Money (QTM) has much to do with the endogenous money approach. In contrast to the exogenous, the endogenous concept reveals debated questions about the origins of demand for money, its connection with money supply, and the potential to generate an excessive quantity of money. …
Quelle / Link: How excessive endogenous money supply can contribute to global financial crises.