Intermediation, Money Creation, and Keynesian Macrodynamics in Multi-agent Systems

This paper offers a simple computational model of monetary creation, derived from individual agent behavior, that provides additional support for the well-known and more or less universally accepted idea that money creation is inevitable in demand-driven Keynesian economies. The endogeneity of money is linked to asynchronous production, in which investment is set autonomously by a combination of animal spirits and capacity utilization, while savings adjusts to bring about macroeconomic equilibrium. It is seen that once these Keynesian motifs are translated into the agent-based framework, endogenous money arises as a natural consequence of the model. The contribution of the paper is twofold. First, it links endogenous money creation to decision making in real historical time-two shibboleths of post-Keynesian macroeconomics. Second, it suggests a fruitful cross-fertilization between post-Keynesian economics and the methods of agent-based modeling.