Production Structures and Fluctuations in the Money Supply: An Analysis Based on Marx’s Concept of Set-Free Money Capital

Abstract

In chapter 15 of volume 2 of Capital, Marx introduced the concept of set-free money capital during the turnover process of industrial capital, positing its role in the credit system. Saros further formalized this process, suggesting that set-free money capital could serve as loanable funds, impacting the credit system. This article advances this research by making three significant contributions. Firstly, it offers a more succinct formalization of the turnover process, improving pedagogical clarity. Secondly, it reinterprets the significance of set-free money capital within the modern credit money system using post-Keynesian endogenous money theory, linking production directly to the money supply. Lastly, it demonstrates through simulations that production structure influences the periodic fluctuations of set-free money capital at the macro level, affecting the money supply.

JEL Classification: B51, E32, E51