Endogenous money is the idea that the money supply is determined within the economy, primarily by the lending decisions of commercial banks and the demand for credit, rather than being fixed externally by the central bank.

In this view, banks create deposits when they lend, and the central bank supplies reserves to meet the resulting demand at its policy rate. The central bank influences the price and availability of credit, but it does not set the quantity of broad money mechanically.[1]

The concept is contrasted with the exogenous-money view, in which the central bank controls the money supply directly through reserves or the monetary base.[2]

Sources

  1. McLeay, Michael; Radia, Amar; Thomas, Ryland. Money creation in the modern economy. Bank of England Quarterly Bulletin. 2014. View source Accessed Nov 11, 2026.
  2. Jakab, Zoltán; Kumhof, Michael. Banks are not intermediaries of loanable funds — and why this matters. Bank of England Working Paper 529. 2015. View source Accessed Nov 11, 2026.