IDEAS home Printed from https://ideas.repec.org/a/fip/fedcer/y2001iqiiip20-28.html
   My bibliography  Save this article

A simple model of money and banking

Author

Listed:
  • David Andolfatto
  • Ed Nosal

Abstract

This article presents a simple environment that has banks creating and lending out money. The authors define money to be any object that circulates widely as a means of payment and a bank to be an agency that simultaneously issues money and monitors investments. While their framework allows private nonbank liabilities to serve as the economy's medium of exchange, they demonstrate that the cost-minimizing structure has a bank creating liquid funds. In practice, the vast bulk of the money supply consists of private debt instruments that are issued by banks. Thus, their model goes some way in addressing the questions of why private money takes the form it does, and why private money is typically supplied by banks.

Suggested Citation

  • David Andolfatto & Ed Nosal, 2001. "A simple model of money and banking," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 20-28.
  • Handle: RePEc:fip:fedcer:y:2001:i:qiii:p:20-28
    as

    Download full text from publisher

    File URL: http://www.clevelandfed.org/research/Review/2001/simple.pdf
    Download Restriction: no

    File URL: https://fraser.stlouisfed.org/scribd/?toc_id=210629&filepath=/docs/publications/frbclevreview/rev_frbclev_2001q3.pdf&start_page=21#scribd-open
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David Andolfatto & Ed Nosal, 2003. "A theory of money and banking," Working Paper 0310, Federal Reserve Bank of Cleveland.
    2. Igor Fedotenkov, 2016. "Population ageing and inflation with endogenous money creation," Bank of Lithuania Working Paper Series 23, Bank of Lithuania.
    3. Sun, Hongfei, 2007. "Banking, Inside Money and Outside Money," MPRA Paper 4504, University Library of Munich, Germany.
    4. Junfeng Qiu, 2011. "Bank money, aggregate liquidity, and asset prices," Annals of Economics and Finance, Society for AEF, vol. 12(2), pages 295-346, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedcer:y:2001:i:qiii:p:20-28. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (4D Library). General contact details of provider: http://edirc.repec.org/data/frbclus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.