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• Dow, Sheila, C.

There is an apparent disparity between the assumption in mosto macro models of money supply exogeneity and the scope in practice for monetary control. This paper explores the meaning of exogeneity, first in its more powerful form within closed formal systems, then in its more muted form within partial, evolutionary theoretical systems. The reasonableness of the money supply exogeneity assumption for policy purposes in then considered; it is concluded that the assumpiton has unduly hampered design of monetary policy. The refinements of the concept of exogeneity in the econometrics literature are then considered for the light they can shed on the issue. An attempt is made to understand the theoretical compulsion to assume the money supply to be exogenous. Finally, discussion of monetary policy for Europe is considered in the light of the preceding argument.

• Economics and Business

• Economics

This paper has benefited from comments from Victoria Chick, George Evans, John Foster, Jim Malley and Rod St. Hill.