Bank Seigniorage in a Monetary Production Economy

Biagio Bossone

No PKWP2111, Working Papers from Post Keynesian Economics Society (PKES)

Abstract: This article speaks to post-Keynesian economists and their fundamental vision of monetary production economies. It focuses on the role of commercial banks as creators of money in monetary production economies and studies the rent-extraction power of banks in the form of "seigniorage." The article examines how the relative size of banks in the payment system combines with their capacity to determine quantities and prices in the market for demand deposits and gives them the power to extract seigniorage from the economy; it clarifies the distinction between seigniorage originating from commercial bank money creation and profits derived from pure financial intermediation; and analyzes how seigniorage affects the economy’s price level and resource distribution. The article draws political-economy and economic-policy implications.

Keywords: Commercial banks; Interest rate; Money creation; Prices; Resource distribution; Seigniorage (search for similar items in EconPapers)
JEL-codes: E19 E20 E31 E40 E52 E58 E62 G21 (search for similar items in EconPapers)
Pages: 42
Date: 2021-08
New Economics Papers: this item is included in nep-ban, nep-cwa, nep-fdg, nep-isf, nep-mac, nep-mon, nep-pay and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pke:wpaper:pkwp2111

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