Beyond the static money multiplier: in search of a dynamic theory of money
AbstractIn this paper, we analyze the process of money creation in a credit economy. We start from the consideration that the traditional money multiplier is a poor description of this process and present an alternative and dynamic approach that takes into account the heterogeneity of agents in the economy and their interactions. We show that this heterogeneity can account for the instability of the multiplier and that it can make the system path-dependent. By using concepts and techniques borrowed from network theory and statistical mechanics, we then try to shed some light on the actual process by which money is endogenously created in an economy.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 19287.
Date of creation: 2007
Date of revision:
Money; Money multiplier; Network theory; Statistical mechanics.;
Find related papers by JEL classification:
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
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.:
- Finn E. Kydland & Edward C. Prescott, 1990. "Business cycles: real facts and a monetary myth," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-18.
- Adrian Dragulescu & Victor M. Yakovenko, 2000. "Statistical mechanics of money," Papers cond-mat/0001432, arXiv.org, revised Aug 2000.
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