S-WoPEc
 
Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
Ratioinstitutet - The Ratio Institute Ratio Working Papers

No 67:
Clearing vs. Leakage: Does Note Monopoly Increase Money and Credit Cycles?

Per Hortlund

Abstract: The effects of note monopolisation on the amplitude of money and credit cycles are studied. Note monopolisation trades clearing for leakage. If the central bank's reserve ratio is larger than that of the commercial banks, and if the currency-deposit ratio is sufficiently large, the leakage effect could domi-nate the loss-of-clearing effect (base expansion), such that the credit capacity of the banking system decreases. This was the case when the Bank of Sweden gained a note monopoly in 1904. Money and credit cycles should therefore have become smaller. Swedish bank data for 18711938 reveal that money cycles became smaller, but credit cycles larger. The latter is attributed to an increasing time-demand deposit ratio, which increases the credit capacity of the banking system.

Keywords: Clearing mechanism; Credit expansion; Currency-deposit ratio; Fiduciary money; Free banking; Leakage; Money multiplier; (follow links to similar papers)

JEL-Codes: E32; E42; E51; (follow links to similar papers)

25 pages, February 16, 2005

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

ph_cycles.pdf    PDF-file
Download Statistics

Questions (including download problems) about the papers in this series should be directed to Martin Korpi ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:ratioi:0067 This page was generated on 2014-12-14 19:26:19