Monetary Reform for the Euro?

Slides:



Advertisements
Similar presentations
Chapter 18: Money Supply & Money Demand
Advertisements

MONEY. MONETARY AGGREGATES M0 – base money (cash + deposits of the banks with the central bank) M1 – money, narrow money (cash + demand deposits) M2 –
THE IMPACT OF GOVERNMENT POLICY AND REGULATION ON BANKING
Chapter 15 Multiple Deposit Creation and the Money Supply Process.
Money and Interest Rates. Money and Interest Rates The Meaning and Functions of Money.
On Central Banks Objective Understand the role and functioning of central banks.
Monetary Policy Econ  Key player in the financial markets: CENTRAL BANKS: Every sovereign nation has a bank which is the ‘lender of the last.
1 Money, Finance,and the Crisis of Outline of money section 1.Essence of financial markets 2.Balance sheets 3.Introduction to the supply and.
The monetary policy uses three tactics to maintain the monetary stability. They are  Money supply  Money demand  Managing the risks within banking.
Copyright © 2012 Pearson Addison-Wesley. All rights reserved. Chapter 13 Money, Banks, and the Federal Reserve.
Finance THE BANKING SYSTEM. Finance Lecture outline  The types and functions of banking  Central banking  Commercial and investment.
Money and Monetary Policy. Meaning and Functions of Money The functions of money –medium of exchange –means of storing wealth –means of evaluation –means.
Money. Money Supply and Money Demand Frederick University :091.
Chapter 33 Interest Rates and Monetary Policy McGraw-Hill/Irwin
33 Interest Rates and Monetary Policy McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 13 Multiple Deposit Creation and the Money Supply Process 1 Dr. Reyadh Faras.
ทฤษฎีและนโยบาย การเงิน Monetary Theory and Policy Money Supply Process Reference: Money, the Financial System, and the Economy ( R. Glenn Hubbard )
Chapter 21 Money and Central Banking Introduction to Economics (Combined Version) 5th Edition.
Money A medium of exchange, and the final means of payment.
How Banks & Thrifts Create Money Chapter 14. Introduction ► Most transaction accounts are created as a result of loans from banks or thrifts ► This chapter.
Chapter Six The Demand for Money 1. Monetary Aggregates Components of the Money Stock M 0 －－－ Currency in Circulation M 1 －－－ M 1 －－－ M 2 －－－ M 2 －－－ M.
Interest Rates and Monetary Policy Chapter 33 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
Burda & Wyplosz Macroeconomics 3 rd edn OXFORD UNIVERSITY PRESS Table 9.1 Balance sheet of the European Central Bank (September 2000) Source: Monthly Bulletin,
Chapter 13 Multiple Deposit Creation and the Money Supply Process 1.
Chapter 15: The Money Supply Process and the Money Multipliers.
How does a change in money supply affect the economy? Relevant reading: Ch 13 Monetary policy.
Bank Balance Sheets Assignment. 1.The maximum possible loan is $5000. Required reserves =.1 x $150,000 = $15,000 (reserve requirement x demand deposits)
The Federal Reserve. Purpose of “The FED” The Nation’s Central Bank Control Money Supply Regulate the Economy Through Monetary Policy The Government’s.
Monetary Policy Econ  Key player in the financial markets: CENTRAL BANKS: Every sovereign nation has a bank which is the ‘lender of the last.
Alomar_111_201 Chapter 14: Money Creation. Alomar_111_202 How commercial banks can create checkable deposits and issue loans? By this, money is created!
Unorthodox monetary policy Presentation to The European Federation of Financial Analysts Societies Alistair Milne Cass Business School Monday, 23 February.
Monetary Accounts: Analysis and Forecasting  Why stress money?  Money affects output, inflation, and the balance of payments  Money is a medium of exchange.
INTEREST RATES AND MONETARY POLICY McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
© OnlineTexts.com p. 1 Chapter 14 Money and Banking.
MONEY AND BANKING.
The Current Monetary System and the Need for Change
Chapter 16 Interest Rates and Monetary Policy McGraw-Hill/Irwin
MACRO: Unit 3 Review – Double Bb
How modern money supply is created: From textbook to reality
MONEY CREATION AND BANKING IN MODERN ECONOMIES
MONETARY POLICY Lecture 4 Role of banks in the process of money creation Marijana Ivanov, Ph.D.
Money and the Banking System
T Accounts: Demand Deposits and Money Creation?
A financial union By 2019 Beyond 2019
Multiple Deposit Creation and the Money Supply Process
TOPIC 9 BANKING.
Money and Banking Lecture 35.
The Nature and Creation of Money
CREATION OF MONEY USING T-ACCOUNTS
MONETARY POLICY.
19. Role of the Central Bank
Dr Marek Porzycki Chair for Economic Policy
Terms to Know Bank reserves: Currency held by banks in their vaults plus their deposits at Federal Reserve Banks. Required reserves: Funds that a depository.
Cash Reserve Ratio (CRR) – By Prof. Simply Simple
The Federal Reserve System
Cash Reserve Ratio (CRR) – By Prof. Simply Simple
Sides Games.
How Banks and Thrifts Create Money
Multiple Deposit Creation and the Money Supply Process
15 C H A P T E R Monetary Policy FEDERAL RESERVE BANK OF THE U.S.
15 C H A P T E R Monetary Policy FEDERAL RESERVE BANK OF THE U.S.
Fractional Reserve Banking
Banks and the Money Supply
CHAPTER 2 THE FEDERAL RESERVE.
Accounting for financial institution
15 C H A P T E R Monetary Policy FEDERAL RESERVE BANK OF THE U.S.
Multiple Deposit Creation and the Money Supply Process
CHAPTER 9 Who Controls the Money Supply and How?
CHAPTER 2 THE FEDERAL RESERVE.
The Nature and Creation of Money
Presentation transcript:

Monetary Reform for the Euro? 20 November 2017 EU, Euro and Climate Change Seminar Patrizio Lainà University of Helsinki

Outline Current monetary system Monetary reform: full-reserve banking Seignorage from monetary reform Digital cash as a halfway reform

European monetary system States create only cash (<10%) All digital money (deposits) is created by banks (>90%) Banks create money when they grant loans ECB prohibited to finance governments

Theories of money creation Money Multiplier Theory (exogenous money) Modern Monetary Theory (endogenous money) Bank’s balance sheet (PHASE 1) ASSETS LIABILITIES Loan to XX: 0 € XX’s deposits: 0 € Bank’s balance sheet (PHASE 2) ASSETS LIABILITIES Loan to XX: 1000 € XX’s deposits: 1000 €

Monetary reform for the euro: full-reserve banking Money creation a prerogative of states  impose a 100% reserve requirement for banks Implemented in UK and US in 19th century!  Led to current monetary system (bank notes  deposits) Payment system completely secure (no liquidity or solvency problems) Eliminate government guarantees to banks (e.g. deposit insurance, lender of last resort, par clearance) ECB can still target inflation, only the tool changes from interest rate to quantity of money All new money given to states and allocated through democratic fiscal policies

Support from 8 Nobel prize winners Frederick Soddy (1921 in chemistry) Friedrich Hayek (1974) Milton Friedman (1976) James Tobin (1981) Maurice Allais (1988) Merton Miller (1990) Joseph Stiglitz (2001) Edward Prescott (2004)

US already accomplished (almost)! Demand deposits and reserves in the United States

Transition seignorage from monetary reform (only once) Source: Lainà (2017)

Annual seignorage from monetary reform Source: Lainà (2017)

Experiments with a stock-flow consistent model Source: Lainà (forthcoming)

Experiments with a stock-flow consistent model Source: Lainà (forthcoming)

Digital cash as a halfway reform? Politically less demanding Let banks continue to create money States given right to issue digital cash (central bank digital currency) Either directly accounts at central bank or indirectly through payment system providers (incl. banks) Adds tools for monetary policy Sweden, Denmark, Norway and UK are seriously considering  Likely to be issued in the near future!

Conclusions Currently, almost all money created by banks After monetary reform all money issued by states Fiscal capacity extended significantly (annual seignorage 4 % of GDP) Digital cash a step to right direction

Feedback: Privacy Policy Feedback
Do Not Sell My Personal Information
About project: SlidePlayer Terms of Service

© 2025 SlidePlayer.com. Inc. All rights reserved.