Bernardo, Giovanni and Campiglio, Emanuele (2014) A simple model of income, aggregate demand and the process of credit creation by private banks. Empirica, 41 (3). 381 -405. ISSN 0340-8744
Full text not available from this repository.Abstract
This paper presents a small macroeconomic model describing the main mechanisms of the process of creation by the private banking system. The model is composed of a core unit-where the dynamics of income, credit and aggregate demand are determined-and a set of sectoral accounts that ensure its stock-flow consistency. In order to grasp the role of credit and banks on the functioning of the economic system we make an explicit distinction between planned and realized variables, thanks to which, while maintaining the ex-post accounting consistency, we are able to introduce an ex-ante wedge between current aggregate income and planned expenditure. Private banks are the only economic agents capable of filling this gap through the creation of new credit. Through the use of numerical simulation we discuss the link between credit creation and the expansion of economic activity, also contributing to a recent academic debate on the relation between income, debt and aggregate demand.
| Item Type: | Article |
|---|---|
| Official URL: | http://link.springer.com/journal/10663 |
| Additional Information: | © 2014 Springer Science+Business Media New York |
| Divisions: | Grantham Research Institute |
| Subjects: | H Social Sciences > HG Finance |
| Date Deposited: | 06 Jan 2014 16:01 |
| Last Modified: | 12 Dec 2024 00:35 |
| URI: | http://eprints.lse.ac.uk/id/eprint/55152 |
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