Money creation and destruction

Arbeitspapier

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 effciency.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFS Working Paper Series ; No. 555

Classification and Topics

• Classification: Wirtschaft ; General Equilibrium and Disequilibrium: General ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Subject: money creation ; bank deposits ; capital regulation ; zero lower bound ; monetary policy ; price rigidities

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Faure, Salomon ; Gersbach, Hans
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, Center for Financial Studies (CFS)
• (where): Frankfurt a. M.
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/147506
• URN: urn:nbn:de:hebis:30:3-420734
• Last update: 10.03.2025, 11:42 AM CET