Money creation

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Chapter 5 in The International Monetary System and the Theory of Monetary Systems, 2016, pp 45-51 from Edward Elgar Publishing

Abstract: As any economic good, money has to be created. This is particularly obvious when a currency consists of a real commodity, such as gold, and the usual principles about the behaviour of producers make it possible to understand how such a currency is produced. Nowadays, currencies are generally fiduciary currencies, that is, claims on firms which are called banks. Money is created as a counterpart of the distribution of credits. It is stressed that banks are mainly financial intermediaries, but they also play a monetary role which is analysed in this chapter. This chapter also introduces a core principle of monetary problems: the ‘real cash balance effect’, according to which changes in nominal prices allow people to obtain the quantity of money which they desire.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2016
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