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A New Financial System for Poverty Reduction and Growth

Author

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  • Mr. Biaggio Bossone
  • Mr. Abdourahmane Sarr

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.

Suggested Citation

  • Mr. Biaggio Bossone & Mr. Abdourahmane Sarr, 2002. "A New Financial System for Poverty Reduction and Growth," IMF Working Papers 2002/178, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2002/178
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    References listed on IDEAS

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    1. Freeman, Scott, 1996. "Clearinghouse banks and banknote over-issue," Journal of Monetary Economics, Elsevier, vol. 38(1), pages 101-115, August.
    2. Mr. Abdourahmane Sarr, 2000. "Financial Liberalization, Bank Market Structure, and Financial Deepening: An Interest Margin Analysis," IMF Working Papers 2000/038, International Monetary Fund.
    3. Mr. Paul Cashin & Ms. Catherine A Pattillo & Ms. Ratna Sahay & Mr. Paolo Mauro, 2001. "Macroeconomic Policies and Poverty Reduction: Stylized Facts and an Overview of Research," IMF Working Papers 2001/135, International Monetary Fund.
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    Cited by:

    1. Bossone, Biagio, 2021. "Commercial bank seigniorage and the macroeconomy," International Review of Financial Analysis, Elsevier, vol. 76(C).
    2. Biagio Bossone, 2021. "Bank Seigniorage in a Monetary Production Economy," Working Papers PKWP2111, Post Keynesian Economics Society (PKES).

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