IDEAS home Printed from https://ideas.repec.org/a/kuk/journl/v46y2013i3p357-387.html
   My bibliography  Save this article

Towards a More Stable and Sustainable Financial Architecture – A Discussion and Application of the Quantity Theory of Credit

Author

Listed:
  • Richard A. Werner

    () (Chair in International Banking, Director, Centre for Banking, Finance and Sustainable Development, University of Southampton Management School, Southampton SO17 1BJ, UK)

Abstract

Thanks to the banking crisis, there has been a greater awareness that leading economic theories and models, as well as influential advanced textbooks in macroeconomics and monetary economics may have been amiss when they neglected to include banks in their analyses. Economists are now labouring to include banking in their models. However already sixteen years ago a paper was published in Kredit und Kapital which presented probably the simplest possible framework that incorporates the economic consequences of banking into a macroeconomic framework: The ‘Quantity Theory of Credit’ (QTC, Werner (1997)). It resolves a number of perceived ‘anomalies’ in macroeconomics and finance, can be used to explain and predict banking crises, and carries a number of policy implications about how to enhance financial stability and deliver sustainable growth. Unlike many better known and far more complex models and theories, it has fared well during the turbulent period since it was proposed. In this paper QTC is revisited and a number of questions that have been raised in the profession concerning it are discussed. It is then applied to the following questions: how to detect and avoid banking crises; how to deliver sustainable and stable economic growth; how to end post-crisis recessions quickly – such as those in many European economies – while minimising costs to the tax payer; and finally, what a financial architecture would look like that has a higher chance of delivering the latter goals on a regular basis.

Suggested Citation

  • Richard A. Werner, 2013. "Towards a More Stable and Sustainable Financial Architecture – A Discussion and Application of the Quantity Theory of Credit," Credit and Capital Markets, Credit and Capital Markets, vol. 46(3), pages 357-387.
  • Handle: RePEc:kuk:journl:v:46:y:2013:i:3:p:357-387
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

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


    Cited by:

    1. Werner, Richard A., 2014. "Enhanced Debt Management: Solving the eurozone crisis by linking debt management with fiscal and monetary policy," Journal of International Money and Finance, Elsevier, vol. 49(PB), pages 443-469.
    2. Werner, Richard A., 2014. "Can banks individually create money out of nothing? — The theories and the empirical evidence," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 1-19.
    3. Vogel, Harold L. & Werner, Richard A., 2015. "An analytical review of volatility metrics for bubbles and crashes," International Review of Financial Analysis, Elsevier, vol. 38(C), pages 15-28.
    4. Werner, Richard A., 2016. "A lost century in economics: Three theories of banking and the conclusive evidence," International Review of Financial Analysis, Elsevier, vol. 46(C), pages 361-379.
    5. repec:eee:ecolec:v:146:y:2018:i:c:p:26-34 is not listed on IDEAS
    6. Mullineux, Andy, 2014. "Banking for the public good," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 87-94.
    7. Ryan-Collins, Josh & Werner, Richard A. & Castle, Jennifer, 2016. "A half-century diversion of monetary policy? An empirical horse-race to identify the UK variable most likely to deliver the desired nominal GDP growth rate," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 43(C), pages 158-176.

    More about this item

    Keywords

    bank credit; banking and the economy; credit creation; disaggregation of credit; methodology; quantity equation; macroeconomics;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    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:kuk:journl:v:46:y:2013:i:3:p:357-387. 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: (Credit and Capital Markets). General contact details of provider: http://www.credit-and-capital-markets.de/ .

    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.