Working Paper: NBER ID: w0936
Authors: Stanley Fischer
Abstract: The paper sets out and analyzes a simple model of money, banking, and price level determination. The model is first used to illustrate recent developments in the theory and analysis of banking, particularly the distinction between the portfolio management services provided by banks and their provision of transactions services. The assumptions are then extended to analyze price level determination in an economy that becomes an inside money economy as high-powered money goes out of use. The paper concludes by discussing the major unresolved questions about banking, money, and price level determination.
Keywords: Monetary Economics; Banking; Price Level Determination
JEL Codes: E5; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| banks provide portfolio management services (G21) | how money functions within the economy (E40) |
| efficiency of banks in managing services (G21) | overall economic stability (E66) |
| high-powered money becomes less prevalent (E49) | inside money framework (G19) |
| inside money framework (G19) | implications for inflation rates (E31) |
| high-powered money is fixed exogenously (E49) | endogenous price levels (E30) |
| real economic variables determine price levels (E30) | price level determination (E30) |