Discussion — Reading 9: Gurley & Shaw

This session covers Reading 9: the first part of Chapter 5 of Money in a Theory of Finance by Gurley and Shaw (1960)

Reinforcing some of what we learned in Lecture 17, Gurley and Shaw present a model that emphasizes funding over payments. "Primary debt" is any debt that directly funds a real investment—direct investment. "Indirect debt" merely serves as pass-through financing for primary debt—indirect investment. For Gurley and Shaw, "inside money" is any money that directly or indirectly finances private-sector primary debt.

Perry Mehrling says:

"You can focus on pp. 132-173, although I include more in case you want to explore deeper. This book was significant for bringing money back into economics in 1960, and emphasizing the importance of financial intermediation for economic growth. The language "inside" and "outside" money comes from G&S, as also "gross money view" versus "net money view". Their opponents are the monetary Walrasians, mainly Don Patinkin. But they don't really take a payments or market-making view, do they? Instead they emphasize the role of banks as financial intermediaries between savers and investors."

Study Questions

Gurley and Shaw Discussion Thread