Cuba's monetary reform will create multiple shocks

Significance The long-postponed move is essential but will send shockwaves through the economy. Inflation and currency flight will soar. Salary and pension hikes will be quickly eaten up by price rises and companies will fail without new subsidies. Impacts Devaluation may spur far-reaching reforms of inefficient state companies, but Havana has disclosed few details of how that might happen. The new CUP24:USD1 exchange rate will be unsustainable; the black-market rate has already reached CUP50:USD1. Inflation fears will trigger a rush to buy goods, increasing scarcity, hoarding and black-market activity. The disappearance of the CUC will not end monetary dualism: the recently expanded dollar shops will become a parallel monetary circuit.

Financialisation and the limits of circuit theory

The theory of the monetary circuit aims to provide a highly stylised account of the workings of a modern monetary production economy. While there may have been a time when it succeeded in this aim, that time is over. The key development in the monetary sphere of capitalism over recent decades is the advent of financialisation, a phenomenon that circuit theory cannot explain other than by omitting some of its most important characterising features while indiscriminately dismissing those features that it does address as dysfunctional outgrowths. The fact is that a theory that has the aggregate monetary circuit as its methodological framework and whose sole focus is on the financing needs of firms is simply not flexible enough to accommodate the new reality of financialisation. To make that accommodation what is needed is a framework that is sufficiently elastic as to be able to encompass a broad range of socio-economic factors, most notably those associated with demographic change, as co-drivers of financialisaton. This article argues that a framework based on Marx’s commodity principle meets this requirement.

Sharpening Differences in Orthodox and Heterodox Views on Money and Banking

We engage with David Andolfatto (2018) on the theme. The two approaches are alleged to have converged in regarding banks as creators of money in the process of initiating lending. We synthesise insights from different factions of the French camp of political economy to make the case that heterodoxy is richer than this claim. Money as an asset-liability is the wage fund in the “first moment” of the monetary circuit. The accumulation of capital is the “second moment” in the sequence, recorded in a separate account at the bank or supported by a financial institution. The “third moment” is the closing of the accounts of demands and supplies generated by the first two moments. Régulation Theory is a related internally-consistent conceptual structure which tracks modes of production as they evolve in history. We dwell on the constructive aspects of the programme as scholars stitch together elements of the present and develop an apparatus to grapple with the emerging new regime of production and distribution. The private sector and state are joined and the bank-central bank is a continuum. Finally, the class structure in the heterodox approach goes deeper than agent heterogeneity.

Statistical and econometric analysis of the correlation between financial transactions and real economy

The economic activity generates two types of flows: flows of goods and services and cash flows. These two types of flows generate two types of circuits in the economy, flows of goods and services generate the circuit corresponding to real economy and monetary flows (incomes and expenditures) generate the monetary - financial circuit. The monetary circuit is fundamentally determined by the level and structure of real economy. Comparing production revenue used for consumption with the amount of products and services produced and purchased, an average pricing is obtained. Unless the condition that the revenues generated in the economy are equal to production, it will lead to rising prices, i.e., inflation. Therefore, an adequate correlation between financial flows and real economy must be ensured. From this perspective, were analysed countries from European Union over time, using panel analysis.

Evaluation of The Effects of Endogenous Money in Real Cycles

The study analyzes the effects that are of endogeneity of money as it postulates the Post-Keynesian school in the rate of growth of emerging countries such as Colombia, Chile and Argentina and advanced countries like United Kingdom, United States and Canada; making a comparison of the results between the two groups of countries. Moreover, an economic model for each group of countries where domestic credit and international reserves independently explain the monetary base, in order to try to argue the endogeneity of this is estimated. The paper presents an approach to the theoretical framework of the topic from the post-Keynesian approaches, including the theory of the monetary circuit, which becomes important in this work, since circuitists argue that the production process expanded through bank credit , which is part of what is intended to demonstrate. On the other hand, econometric models were estimated using the methodology of panel data for the years between 1994 and 2011. Econometric estimates show first that the growth rate of the two groups of countries is explained by the monetary base and the money multiplier inelastically.; while the monetary base responds inelastically to domestic credit and international reserves in the two groups of countries.El estudio analiza los efectos que existen de la endogeneidad del dinero como lo postula la escuela Post-Keynesiana en la tasa de crecimiento de países emergentes como Colombia, Chile y Argentina y de países avanzados como Reino Unido, Estados Unidos y Canadá; realizando una comparación de los resultados entre los dos grupos de países. De otra parte, se estima un modelo económico para cada grupo de países en el que los créditos domésticos y las reservas internacionales explican de manera independiente a la base monetaria, con el fin de tratar de argumentar la endogeneidad de la misma. El documento presenta una aproximación al marco teórico del tema tratado desde los planteamientos post-keynesianos, incluyendo la teoría del circuito monetario, la cual cobra importancia en este trabajo, ya que los circuitistas argumentan que el proceso de producción se expande a través el crédito bancario, que es en parte lo que se pretende demostrar. De otro lado, los modelos econométricos se estimaron utilizando la metodología de panel de datos, para los años comprendidos entre 1994 y 2011. Las estimaciones econométricas evidencian en primer lugar que la tasa de crecimiento de los dos grupos de países está explicada por la base monetaria y el multiplicador monetario de manera inelástica.; mientras que la base monetaria reacciona inelásticamente a los créditos domésticos y a las reservas internacionales en los dos grupos de países.O estudo analisa os efeitos que existem endogeneidade de dinheiro como postulado escola pós-keynesiana da taxa de crescimento dos países emergentes, como Colômbia, Chile e Argentina e os países avançados, como Reino Unido, Estados Unidos e Canadá; fazendo uma comparação dos resultados entre os dois grupos de países. Além disso, um modelo econômico para cada grupo de países onde o crédito doméstico e as reservas internacionais explicar de forma independente a base monetária, a fim de tentar argumentar a endogeneidade do mesmo é esperado. O artigo apresenta uma abordagem para o enquadramento teórico do tema das abordagens pós-keynesianos, incluindo a teoria do circuito monetário, o que se torna importante neste trabalho, uma vez que os agentes argumentam que o processo de produção se expande através de crédito bancário , que é, em parte, o que é destinado a provar. Por outro lado, os modelos econométricos foram estimados utilizando a metodologia de dados em painel para os anos entre 1994 e 2011. estimativas econométricas mostram pela primeira vez que a taxa de crescimento dos dois grupos de países é explicada pela base monetária eo multiplicador de dinheiro inelástica.; enquanto a base monetária reage inelástica ao crédito interno e as reservas internacionais nos dois grupos de países.