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Endogenous money and shareholders' funds in the classical theory of banking

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Date
1998
Dewey
Macroéconomie
Sujet
Classical school of economics; Money; Stock funds; Banks & banking
JEL code
G23; E50
Journal issue
European Journal of the History of Economic Thought
Volume
5
Number
1
Publication date
1998
Article pages
60-84
Publisher
Routledge
DOI
http://dx.doi.org/10.1080/10427719800000003
URI
https://basepub.dauphine.fr/handle/123456789/2019
Collections
  • LEDa : Publications
Metadata
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Author
de Boyer des Roches, Jérôme
Type
Article accepté pour publication ou publié
Abstract (EN)
By its nature, bank money is endogenous, but its issuing is risky and presupposes the presence of banks' shareholders' funds. Shareholders' funds give banks the means of dealing with the difficulties involved in the process of money creation and which are inherent to the banking activity: convertibility constraint, credit and liquidity risks. Unlike the Ricardian paradigm, Smith's 'real bill theory' and Thornton's 'lender of last resort theory' point out the functions of shareholder's funds. Therefore their monetarybanking approachs seem more complementary than contradictory. In other respects, the theory of endogenous money and credit introduces risks and capital in the analysis of exchange and lead to questioning the classical market theory constructed on the model of bartering.

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