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The Credit View, Old and New

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  • Trautwein, Hans-Michael

Abstract

Recent writings in the so-called "credit view" focus on binding finance constraints of macroeconomic activity which arise from the incomplete substitutability of bank credit and from changes in borrowers' net worth. They criticize the standard approaches in the "money view" for not taking full account of the observable effects of monetary restrictions on real activity. In this paper, the "new credit view" is contrasted with older macroeconomic theories that placed special emphasis on the banks' systemic potential to expand credit beyond planned saving. The comparative discussion of the underlying arguments about bank behaviour, about the non-neutrality of credit money, and about the transmission of monetary policy impulses reveals some shortcomings in the new view. History helps, moreover, to set the conventional confrontations of the "credit view" and the "money view" in perspective. Copyright 2000 by Blackwell Publishers Ltd

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  • Trautwein, Hans-Michael, 2000. " The Credit View, Old and New," Journal of Economic Surveys, Wiley Blackwell, vol. 14(2), pages 155-189, April.
  • Handle: RePEc:bla:jecsur:v:14:y:2000:i:2:p:155-89
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