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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It is remarkable that the Fed never tried to openly verticaalists borrowed reserves targeting as a coherent method. What may explain why Moore could formulate his critique of the US Federal Reserve and academic monetary doctrine so early was his strong interest in banking and finance matters.

Search Google Scholar Export Citation. In Bindseil a p. Moore’s ideas may have shaped the course of post-Keynesian economics. We discuss this book from today’s perspective, and in particular whether Moore’s main assertions have been validated verticalisrs rejected by the development of central bank practices and academic monetary economics.


The supply of credit money verticalits endogenous, is demand-determined, and only its price can be controlled by the central bank, not its quantity. For example, the indeterminacy debate, triggered by Sargent and Wallace’s unpleasant monetarist arithmetic — whose repercussions run through virtually all current monetary models — essentially focused on the vfrticalists of whether or 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.

This culminated in in his book, Horizontalists and Verticalists: The recent writings of, for example, Godley and Lavoie confirm this point of view.

In our opinion, these criticisms were at the core of Moore’s reasoning. The verticalist paradigm may apply in a world of commodity or pure fiat money. Views Read Edit View history. The foundations for modern New Keynesian monetary models had been laid by Calvo or Blanchard and Kyotaki European Journal of Economics and Economic Policies: This was Moore’s message in and it was a brave one.

The Wicksellian theory of the natural rate of interest has regained popularity and we believe that this theory is fundamentally correct, even if there is a danger of misinterpreting it. 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….


Horizontalism influenced monetary circuit theorists to develop the endogenous money approach that was already nascent within Post-Keynesian academic thought.

These worries were largely confirmed by the verticalisgs that led to the financial crisis of — and the need for central banks to massively intervene to substitute for the drying-out of short-term capital hogizontalists funding sources. Yet, in light of the strong vindication of Moore’s book and the recent progress of mainstream economics to formulate monetary policy in terms of interest rates, we believe that the textbook view of controllable money supply will also be buried some day and thus the mainstream academic profession must, hopefully, eventually recognize the merits and power of the horizontalist view.

With respect to monetary issues, they firmly rested on the possibility that central banks can exert direct control over the monetary base. And, surprisingly, it’s all contained in Basil Moore’s book. He spent his first sabbatical with John Gurley and Edward Shaw in Stanford who, inhad written their influential monograph, Money in a Theory of Finance.

This curious disjunction between theory and practice predates the enthusiasm of the s for monetary targets. Show Summary Details Basil J.

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

In Basil Moore published his book Horizontalists and Verticalists: The Macroeconomics of Credit Moneywhich this year celebrates its 25th birthday. Although we have to admit that neither of us is much acquainted with the post-Keynesian literature, we believe that the Festschrift edited by Setterfield is evidence enough of Moore’s influence in this field of economics.

Verticaists using this site, you agree to the Terms of Use and Privacy Policy. Moore was aware of the consequences of removing this central assumption and instead adopting the horizontal view. For the social relationship of Horizontalism, see Horizontalidad. This economics -related article is a stub. Thus credit money created by private banks can be seen to be leveraging of those reserves without the guidance of a particular leverage ratioi.

The online content platform for Edward Elgar Publishing. A student of neoclassical Austrian Fritz Machlup, Basil Moore became interested in money and banking very early in his career. In contrast, we believe that the idea of a natural rate of interest does not verticakists into question the possibility that the central bank controls the actual money rate.


We verticalissts do believe that Moore’s book rightly deserves its place in the history of economic thought. One of us UB has to acknowledge that he himself largely overlooked Moore, in Bindseil a and b. Virtually everything written in the monetary, macro- and growth literature — [is] either mis-specified or incomplete.

Horizontalists and Verticalists: 25 years later

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. 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 ferticalists theory for a commodity standard. Horizontalism is an approach to money creation theory pioneered by Basil Moore which states that private bank reserves are not managed by central banks.

Moore BasilHorizontalists and Verticalists: Since the control of interest rates takes place through financial transactions which have a balance sheet representation, it provides discipline to explicitly write down these transactions and how they feed through the financial system in a closed system of T-accounts.

Under the influence of Paul Davidson, Moore began to develop his views on monetary macroeconomics, primarily as a response to the dominant paradigm of Friedman’s monetarism. More Contact us Publish with us Subscribe. Sign in to annotate. Obviously this policy parameter does not have a natural tendency to correct itself. Finally, inthe Fed implemented a reform to its discount window, setting the discount rate systematically basis points above the horisontalists funds target rate and thus, after more than 80 years, it put an end to setting the discount rate below market rates.

Nonetheless, theoretical analyses of monetary policy have until recently almost invariably characterised policy horizontalishs terms of a path for the money supply, and discussions of policy rules in the theoretical literature have mainly considered money-growth rules of one type or another.