Levrero, Enrico Sergio and Deleidi, Matteo (2017): The money creation process: A theoretical and empirical analysis for the US.
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Abstract
The aim of this paper is to assess – on both theoretical and empirical grounds – the two main views regarding the money creation process,namely the endogenous and exogenous money approaches. After analysing the main issues and the related empirical literature, we will apply a VAR and VECM methodology to the United States in the period 1959-2016 to assess the causal relationship between a number of critical variables that are supposed to determine the money supply, i.e., the monetary base, bank deposits and bank loans. The empirical analysis carried out supports several propositions of the endogenous money approach. In particular, it shows that for the United States in the years 1959-2016 (i) bank loans determine bank deposits and (ii) bank deposits in turn determine the monetary base. Our conclusion is that money supply is mainly determined endogenously by the lending activity of commercial banks.
Item Type: | MPRA Paper |
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Original Title: | The money creation process: A theoretical and empirical analysis for the US |
English Title: | The money creation process: A theoretical and empirical analysis for the US |
Language: | English |
Keywords: | Money endogeneity; USA; Money Supply |
Subjects: | C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E40 - General E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E50 - General E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages |
Item ID: | 81970 |
Depositing User: | Prof. Enrico Sergio Levrero |
Date Deposited: | 16 Oct 2017 20:33 |
Last Modified: | 26 Sep 2019 10:19 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/81970 |