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Money, Credit and Banking

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  • Aleksander Berentsen
  • Gabriele Camera
  • Christopher Waller

Abstract

In many situations, some people hold large money balances but have no particular urgency to spend them while others are liquidity constrained. This problem creates a role for financial intermediaries who accept nominal deposits and make nominal loans. We show that financial intermediation improves the allocation away from the Friedman rule. The gains in welfare come from the payment of interest on deposits and not from relaxing borrowers\rquote liquidity constraints. We also demonstrate that increasing the rate of inflation can be welfare improving when credit rationing occurs.

Suggested Citation

  • Aleksander Berentsen & Gabriele Camera & Christopher Waller, "undated". "Money, Credit and Banking," IEW - Working Papers 219, Institute for Empirical Research in Economics - University of Zurich.
    • Handle: RePEc:zur:iewwpx:219
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    References listed on IDEAS

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    More about this item

    Keywords

    Money; Credit; Rationing; Banking;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines

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