Money and Banking

Nektarios Michail

Chapter Chapter 4 in Money, Credit, and Crises, 2021, pp 77-90 from Springer

Abstract: Abstract At the time countries were tied to the gold standard, money supply in the economy was, as already discussed, effectively controlled by the amount of gold in the economy. This chapter examines how modern banks function and how these institutions are essential for the money creation process. Bank balance sheet illustrations are presented in order to provide the reader with a clear view of the changes in the bank’s books after a new loan is created. Drawing from the above allows us to depart from the classical notion of a money multiplier and create an enhanced version, based on capital ratios. The chapter moves on to examine how changes in bank deposits, unrelated to changes in lending can signal potential incentives for excess lending or potential liquidity shortages in the future. The role of the central bank is also underlined in this chapter as, in the realistic case of multiple commercial banks, funds are limited to the provision of central bank liquidity, and to some extent, to changes in government debt.

Date: 2021
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:spr:sprchp:978-3-030-64384-3_4

Ordering information: This item can be ordered from
http://www.springer.com/9783030643843

DOI: 10.1007/978-3-030-64384-3_4

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().