NDLI: A simple model of income, aggregate demand and the process of credit creation by private banks

Content Provider	Springer Nature Link
Author	Bernardo, Giovanni Campiglio, Emanuele
Copyright Year	2013
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.
Starting Page	381
Ending Page	405
Page Count	25
File Format	PDF
ISSN	03408744
Journal	Empirica
Volume Number	41
Issue Number	3
e-ISSN	15736911
Language	English
Publisher	Springer US
Publisher Date	2013-12-03
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Banking system Credit creation Growth Aggregate demand Macroeconomic modeling European Integration International Economics Macroeconomics/Monetary Economics Econometrics Industrial Organization Public Finance & Economics
Content Type	Text
Resource Type	Article
Subject	Geography, Planning and Development Development Economics and Econometrics

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1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
2	Indian Institute of Technology Kharagpur	Host Institute of the Project: The host institute of the project is responsible for providing infrastructure support and hosting the project	https://www.iitkgp.ac.in
3	National Digital Library of India Office, Indian Institute of Technology Kharagpur	The administrative and infrastructural headquarters of the project	Dr. B. Sutradhar bsutra@ndl.gov.in
4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
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