Keynes’ Finance Circuit model on banks in Africa

Abstract Since the publication of Keynes General Theory in 1936 when Keynes developed an original Finance Circuit model which was subsequently enriched by the post-Keynesian theory of endogenous money supply, no study has undertaken Keynes Finance Circuit model complete causality tests. The present paper breaks new ground and aims at filling the above lacuna by employing Granger non-causality test for heterogeneous panel data models to investigate the above model based on a sample of 32 African countries, for the period from 1990 to 2021. Our results lend support to the complete Keynes Finance Circuit model in the short run. In the long run, all causalities are vindicated except the causal relationship running from economic growth to savings which appears insignificant. In terms of policy implication, we are encouraging policymakers to design policies that will stimulate economic growth within a post-Keynesian endogenous money supply framework.