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Bank Seigniorage in a Monetary Production Economy

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  • Biagio Bossone

Abstract

This article speaks to post-Keynesian economists and their fundamental vision of monetary production economies. It focuses on the role of commercial banks as creators of money in monetary production economies and studies the rent-extraction power of banks in the form of "seigniorage." The article examines how the relative size of banks in the payment system combines with their capacity to determine quantities and prices in the market for demand deposits and gives them the power to extract seigniorage from the economy; it clarifies the distinction between seigniorage originating from commercial bank money creation and profits derived from pure financial intermediation; and analyzes how seigniorage affects the economy’s price level and resource distribution. The article draws political-economy and economic-policy implications.

Suggested Citation

  • Biagio Bossone, 2021. "Bank Seigniorage in a Monetary Production Economy," Working Papers PKWP2111, Post Keynesian Economics Society (PKES).
  • Handle: RePEc:pke:wpaper:pkwp2111
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    File URL: https://www.postkeynesian.net/downloads/working-papers/PKWP2111.pdf
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    Cited by:

    1. Zbigniew Polański & Mikołaj Szadkowski, 2021. "An accounting-based model of seigniorage, and recent monetary developments," Bank i Kredyt, Narodowy Bank Polski, vol. 52(5), pages 391-436.

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    More about this item

    Keywords

    Commercial banks; Interest rate; Money creation; Prices; Resource distribution; Seigniorage;
    All these keywords.

    JEL classification:

    • E19 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Other
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • 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
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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