The Demand for Endogenous Money

Thomas Palley (1991) listed the demand for deposits newly created by bank lending as one of the 2 remaining areas of disagreement among economist otherwise united in the belief that the money supply in developed financial systems is endogenously determined. Palley asked what agents having received a deposit will do with it - spend it, repay existing loans, buy bonds, or simply hold it. He said that all of these actions have ramifications for the final equilibrium and may have feedback effects on the level of bank lending and the money supply. Here, a systematic look is taken at the answers that have been provided to Palley's question.