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Money creation

In: The International Monetary System and the Theory of Monetary Systems

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Abstract

As any economic good, money has to be created. This is particularly obvious when a currency consists of a real commodity, such as gold, and the usual principles about the behaviour of producers make it possible to understand how such a currency is produced. Nowadays, currencies are generally fiduciary currencies, that is, claims on firms which are called banks. Money is created as a counterpart of the distribution of credits. It is stressed that banks are mainly financial intermediaries, but they also play a monetary role which is analysed in this chapter. This chapter also introduces a core principle of monetary problems: the ‘real cash balance effect’, according to which changes in nominal prices allow people to obtain the quantity of money which they desire.

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  • ., 2016. "Money creation," Chapters, in: The International Monetary System and the Theory of Monetary Systems, chapter 5, pages 45-51, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:17285_5
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    Keywords

    Economics and Finance;

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