Open access
Datum
2021-09Typ
- Journal Article
Abstract
We study today’s two-tier money creation and destruction system: Commercial banks create bank deposits (privately created money) through loans to firms or asset purchases from the private sector. Bank deposits are destroyed when households buy bank equity or when firms repay loans. Central banks create electronic central bank money (publicly created money or reserves) through loans to commercial banks. In a simple general equilibrium setting, we show that symmetric equilibria yield the first-best level of money creation and lending when prices are flexible, regardless of monetary policy and capital regulation. When prices are rigid, we identify the circumstances in which money creation is excessive or breaks down and the ones in which an adequate combination of monetary policy and capital regulation can restore efficiency. Finally, we provide a series of extensions and generalizations of the results. Mehr anzeigen
Persistenter Link
https://doi.org/10.3929/ethz-b-000498313Publikationsstatus
publishedExterne Links
Zeitschrift / Serie
Annals of FinanceBand
Seiten / Artikelnummer
Verlag
SpringerThema
Money creation; Bank deposits; Capital regulation; Zero lower bound; Monetary policy; Price rigiditiesOrganisationseinheit
03729 - Gersbach, Hans / Gersbach, Hans