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The Reserve Bank, private sector banks and the creation of money and credit


  • Gillian Lawrence

    (Reserve Bank of New Zealand)


This article provides an overview of the functions of money, and how money and credit are created in the economy. The roles of the Reserve Bank and private sector banks are illustrated, and we explain the link between money and monetary policy.

Suggested Citation

  • Gillian Lawrence, 2008. "The Reserve Bank, private sector banks and the creation of money and credit," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 71, March.
  • Handle: RePEc:nzb:nzbbul:march2008:4

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    References listed on IDEAS

    1. David Longworth, 2003. "Money in the Bank (of Canada)," Technical Reports 93, Bank of Canada.
    2. Michael Woodford, 1998. "Doing Without Money: Controlling Inflation in a Post-Monetary World," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 173-219, January.
    3. Eric M. Leeper & Jennifer E. Roush, 2003. "Putting "M" back in monetary policy," Proceedings, Federal Reserve Bank of Cleveland, pages 1217-1264.
    4. Reynard, Samuel, 2007. "Maintaining low inflation: Money, interest rates, and policy stance," Journal of Monetary Economics, Elsevier, vol. 54(5), pages 1441-1471, July.
    5. Bennett T. McCallum, 2001. "Monetary policy analysis in models without money," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 145-164.
    6. Stefan Gerlach & Janet Kong, 2005. "Money and Inflation in China," Working Papers 0504, Hong Kong Monetary Authority.
    7. Alfred Wong & Arthur Grimes, 1991. "The New Zealand monetary aggregates," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 54, december.
    8. W A Razzak, 2001. "Money in the era of inflation targeting," Reserve Bank of New Zealand Discussion Paper Series DP2001/02, Reserve Bank of New Zealand.
    9. John Tait, 1989. "The use of monetary aggregates as monetary policy indicators," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 52, December.
    10. Siklos, Pierre L. & Eckhold, Kelly R., 1997. "Income Velocity in Turbulent Times: The Role of Institutional Factors in the New Zealand Experience," Journal of Macroeconomics, Elsevier, vol. 19(1), pages 31-52, January.
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