Commercial bank seigniorage and the macroeconomy

Biagio Bossone

International Review of Financial Analysis, 2021, vol. 76, issue C

Abstract: This article focuses on the role of commercial banks as creators of money, and specifically on their rent extraction power in the form of seigniorage. The article examines how the relative size of banks in the payment system combines with their capacity (and limits) to determine quantities and prices in the market for demand deposits, giving them the power to extract rents – seigniorage – from the economy, and clarifies the distinction between seigniorage from commercial bank money creation and profits from pure financial intermediation. The article studies how this form of seigniorage affects aggregate output, prices, and resource distribution, and draws political-economy and economic-policy implications.

Keywords: Aggregate output; Commercial banks; Interest rate; Money creation; 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)
Date: 2021
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:76:y:2021:i:c:s1057521921001162

DOI: 10.1016/j.irfa.2021.101775

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