Keynes, Graziani, and Non-Bank Financial Intermediaries: A Stock-Flow Consistent Analysis

This paper investigates the macroeconomic and distributive implications of Non-Bank Financial Intermediaries (NBFIs) in modern monetary economies. Building on Keynes’s Monetary Theory of Production and Graziani’s Monetary Circuit Theory, and embedding them within a Stock–Flow Consistent (SFC) framework, the paper focuses on a specific segment of the NBFIs, namely those institutions ̶ such as consumer finance and car-leasing companies ̶ whose lending activities rely primarily on short-term funding. The Financial Stability Board, which classifies NBFIs by their economic functions, has labelled those institutions Economic Function 2 (or EF2). Although EF2 does not create money, as commercial banks do, it nonetheless influences both the channel of creation of money and the channel of circulation and destruction of money within modern economies. The model simulation across alternative scenarios shows that EF2 can support production and employment in the short run, yet tends to exacerbate income and wealth inequality over time.