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A New Financial System for Poverty Reduction and Growth

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  • Biaggio Bossone
  • Abdourahmane Sarr
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    Abstract

    Our proposal draws on the premise that the availability of stable demand deposits for bank lending, in the process of which inside money is created, does not require any act of intentional saving. The mechanism allowing banks to lend deposits does not function well in low-income countries, owing to a number of structural constraints. We argue that separating inside money creation from lending, and distributing it on a nonlending basis to depositors through specialized payment service institutions, could broaden access to financial resources, fuel non-inflationary, demand-led growth; and foster financial deepening, diversification, and stability. We also argue that the proposed reform is consistent with market incentives and sound economic management.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/178.

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    Length: 43
    Date of creation: 01 Oct 2002
    Date of revision:
    Handle: RePEc:imf:imfwpa:02/178

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    Related research

    Keywords: Banks; Credit; Poverty reduction; Consumption; Production; Employment; banking; payments; seigniorage; narrow banking; collateral; foreign exchange; reserve ratio; payment system; bank loans; reserve requirement; bank lending; banking sector; checks; bank money; shares; bank liabilities; safekeeping; purchases; substitution; prices; banking systems; reserve requirements; bank reserve; bank reserves; safekeeping services; bank debt; bank deposits; cash flows; resource allocation; bank deposit; bank financing; financial strength; bank accounts; bank market; pricing; banking market; clients; demand deposit; banking system; recapitalization; account maintenance; check clearing; bank credit; bank nationalization; refinancing; cash management; banking activities; bank deposit accounts; marginal cost pricing; retained earnings; banknotes; deposit insurance; capital budgeting; bank issues; capital requirement; banking sector problems; bank intermediation; bank restructuring; bank failure; excess liquidity; bank agents; credit union; disintermediation; private bank; income statement; shareholders; bank policy; bank balance sheets; bank lending to intermediaries; minimum reserve requirement; minimum reserve ratio; financial risk; bank transaction; bank failures; bank size; bank contracts; state intervention; banknote; clearing house; banking business;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Vassili Prokopenko & Paul Holden, 2001. "Financial Development and Poverty Alleviation," IMF Working Papers 01/160, International Monetary Fund.
    2. Paul Cashin & Catherine A. Pattillo & Ratna Sahay & Paolo Mauro, 2001. "Macroeconomic Policies and Poverty Reduction," IMF Working Papers 01/135, International Monetary Fund.
    3. Saint-Paul, G., 1990. "Technological Choice, Financial Markets and Economic Development," DELTA Working Papers 90-30, DELTA (Ecole normale supérieure).
    4. James McAndrews & William Roberds, 1999. "Payment intermediation and the origins of banking," Staff Reports 85, Federal Reserve Bank of New York.
    5. Scott Freeman, 1993. "Clearinghouse banks and banknote over-issue," Research Paper 9326, Federal Reserve Bank of Dallas.
    6. Bossone, Biagio, 2001. "Circuit theory of banking and finance," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 857-890, May.
    7. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
    8. Abdourahmane Sarr, 2000. "Financial Liberalization, Bank Market Structure, and Financial Deepening," IMF Working Papers 00/38, International Monetary Fund.
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