Logo
Munich Personal RePEc Archive

The money creation process: A theoretical and empirical analysis for the US

Levrero, Enrico Sergio and Deleidi, Matteo (2017): The money creation process: A theoretical and empirical analysis for the US.

[thumbnail of MPRA_paper_81970.pdf]
Preview
PDF
MPRA_paper_81970.pdf

Download (709kB) | Preview

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.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.