Hortlund, Per () (Dept. of Economics, Stockholm School of Economics)
Abstract
The effects of note monopolisation on the amplitude of money and credit cycles are studied. Swedish bank data for 1871–1915 reveal that money cycles became smaller, but credit cycles larger, after the Bank of Sweden gained a note monopoly in 1904. At the same time, the money multiplier decreased, while the credit multiplier increased. If the central bank's reserve ratio is larger than that of the commercial banks, and if the currency-deposit ratio is sufficiently large, the leakage effect could dominate the loss-of-clearing effect (base expansion), such that the money multiplier decreases. That the credit multiplier simultaneously increased is attributed mainly to an increasing time-demand deposit ratio, which increased the credit capacity of the banking system.
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Length: 34 pages Date of creation: 15 Jun 2005 Date of revision: Handle: RePEc:hhs:hastef:0600
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Find related papers by JEL classification: E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
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