The monetary circuit in the age of financialisation. A stock-flow consistent model with a twofold banking sector

The paper explores how the Theory of Monetary Circuit can be developed to reflect some important features of the evolution of the financial system in the past three decades, which have been associated with what may be termed ‘financialisation.’ For this purpose, we embed the benchmark single-period monetary circuit scheme proposed by Graziani in a richer set of institutional arrangements. The stock-flow consistent modelling technique pioneered by Godley and Lavoie is used to support our narrative.