Inside Money as a Source of Investment Finance
AbstractHouseholds demand bank deposits for the liquidity services such assets provide. Higher yielding assets usually are available to finance future consumption. Nevertheless, the demand for bank liabilities enables banks to finance investment. One might therefore expect more capital in an economy utilizing banks. The author shows that, when low wealth households cannot borrow, bank lending increases the capital stock and reduces equilibrium interest rates, while making the real equilibrium more sensitive to shifts in the demand for inside money. When households can borrow, however, bank lending is absorbed by low wealth households and banks have few effects on the real equilibrium.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 30 (1998)
Issue (Month): 2 (May)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
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- Stracca, Livio, 2007. "Should we take inside money seriously?," Working Paper Series 0841, European Central Bank.
- Luca Guerrieri & Matteo Iacoviello & Raoul Minetti, 2012.
"Banks, Sovereign Debt and the International Transmission of Business Cycles,"
NBER Working Papers
18303, National Bureau of Economic Research, Inc.
- Luca Guerrieri & Matteo Iacoviello & Raoul Minetti, 2013. "Banks, Sovereign Debt, and the International Transmission of Business Cycles," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 9(1), pages 181 - 213.
- Luca Guerrieri & Matteo Iacoviello & Raoul Minetti, 2012. "Banks, Sovereign Debt and the International Transmission of Business Cycles," NBER Chapters, in: NBER International Seminar on Macroeconomics 2012, pages 181-213 National Bureau of Economic Research, Inc.
- Luca Guerrieri & Matteo Iacoviello & Raoul Minetti, 2012. "Banks, sovereign debt and the international transmission of business cycles," International Finance Discussion Papers 1067, Board of Governors of the Federal Reserve System (U.S.).
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