EconPapers    
Economics at your fingertips  
 

Money creation in the modern economy

Michael McLeay, Amar Radia () and Ryland Thomas ()

Bank of England Quarterly Bulletin, 2014, vol. 54, issue 1, 14-27

Abstract: This article explains how the majority of money in the modern economy is created by commercial banks making loans. Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits. The amount of money created in the economy ultimately depends on the monetary policy of the central bank. In normal times, this is carried out by setting interest rates. The central bank can also affect the amount of money directly through purchasing assets or ‘quantitative easing’.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (161) Track citations by RSS feed

Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... 123544205CE476E01654 Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boe:qbullt:0128

Access Statistics for this article

Bank of England Quarterly Bulletin is currently edited by Lindsey Fowler

More articles in Bank of England Quarterly Bulletin from Bank of England Publications Group Bank of England Threadneedle Street London EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Publications Group ().

 
Page updated 2020-01-21
Handle: RePEc:boe:qbullt:0128