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Title:Money creation and financial instability: An agent-based credit network approach PDF Logo
Authors:Lengnick, Matthias
Krug, Sebastian
Wohltmann, Hans-Werner
Issue Date:2012
Series/Report no.:Economics Working Paper, Christian-Albrechts-Universität Kiel, Department of Economics 2012-15
Abstract:We pick up the standard textbook approach of money creation and develop a simple agent-based alternative. We show that our model is well suited to explain the endogenous creation of money. Although more general, our model still contains the standard results as a limiting case. We also uncover a potential instability that is hidden in the standard approach but easily recognized within a strict individual-based and stock-flow consistent version. We show in detail how individual interactions build up systemic risk and how banking crises are triggered by the maturity mismatch of different cash-flows and spread by the depreciation of non-performing loans (e.g. interbank- or government debt).
Subjects:financial instability
endogenous money
agent-based macroeconomics
stock-flow consistency
disequilibrium analysis
JEL:C63
E42
E51
G01
Document Type:Working Paper
Appears in Collections:Economics Working Papers, Department of Economics, CAU Kiel

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