Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/167551
Authors: 
Faure, Salomon
Gersbach, Hans
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6565
Abstract: 
We study money creation and destruction in today’s monetary architecture within a general equilibrium setting. Two types of money are 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 symmetric equilibria yield the first-best allocation when prices are exible, 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 how an adequate combination of monetary policy and capital regulation may restore efficiency.
Subjects: 
money creation
bank deposits
capital regulation
zero lower bound
monetary policy
price rigidities
JEL: 
D50
E40
E50
G21
Document Type: 
Working Paper

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