Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/147506
Authors: 
Faure, Salomon
Gersbach, Hans
Year of Publication: 
2016
Series/Report no.: 
CFS Working Paper Series No. 555
Abstract: 
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.
Subjects: 
money creation
bank deposits
capital regulation
zero lower bound
monetary policy
price rigidities
JEL: 
D50
E4
E5
G21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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