Money creation and destruction

  • We study money creation and destruction in today’s monetary architecture and examine the impact of monetary policy and capital regulation in a general equilibrium setting. There are two types of money created and destructed: bank deposits, when banks grant loans to firms or to other banks and central bank money, when the central bank grants loans to private banks. We show that equilibria yield the first-best level of money creation and lending when prices are flexible, regardless of the monetary policy or 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.

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Metadaten
Author:Salomon Faure, Hans GersbachGND
URN:urn:nbn:de:hebis:30:3-420734
URL:https://ssrn.com/abstract=2866473
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 555
Series (Serial Number):CFS working paper series (555)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Language:English
Date of Publication (online):2016/11/15
Year of first Publication:2016
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2016/11/15
Tag:bank deposits; capital regulation; monetary policy; money creation; price rigidities; zero lower bound
Issue:First Version: September 2014, This Version: October 2016
Page Number:77
HeBIS-PPN:396765467
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht