Money creation and financial instability: An agent-based credit network approach

Arbeitspapier

The authors pick up the standard textbook approach of money creation and develop a simple agent-based alternative. They show that their model is well suited to explain the endogenous creation of money. Although more general, their model still contains the standard results as a limiting case. The authors also uncover a potential instability that is hidden in the standard approach but easily recognized within a strict individual-based and stock-flow consistent version. They show in detail how individual interactions build up systemic risk and how banking crises are triggered by the maturity mismatch of different cash-flows and spread by the depreciation of non-performing loans (e.g. interbank or government debt).

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Economics Discussion Papers ; No. 2012-61

Classification and Topics

• Classification: Wirtschaft ; Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems ; Money Supply; Credit; Money Multipliers ; Computational Techniques; Simulation Modeling ; Financial Crises
• Subject: financial instability ; endogenous money ; agent-based macroeconomics ; stock-flow consistency ; disequilibrium analysis

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lengnick, Matthias ; Krug, Sebastian ; Wohltmann, Hans-Werner
• Event: Veröffentlichung
• (who): Kiel Institute for the World Economy (IfW)
• (where): Kiel
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/67493
• Last update: 10.03.2025, 11:43 AM CET