This study examines the role of information sharing in modulating the effect of financial access on income inequality in 48 African countries for the period 2004-2014. Information sharing is proxied ...with private credit bureaus and public credit registries. All dynamics of financial development are taken into account, namely: depth (money supply and liquid liabilities), efficiency (at banking and financial system levels), activity (from banking and financial system perspective) and size. The empirical exercise is based on interactive Generalised Method of Moments. It can be established from the findings that: first, a threshold of 18.072 percentage coverage of public credit registries is needed to counteract the unconditional positive effect of banking system efficiency. Secondly, on the role of private credit bureaus in financial depth, both the unconditional and the conditional effects are negative, implying a negative synergy. Overall, the findings show that, contingent on the type of financial development dynamic, credit registries broadly play their theoretical role of decreasing financing constraints in order to ultimately reduce inequality.
Despite recent clarifications by central banks that it is indeed commercial banks that are the main creators of the money supply, money creation processes remain as confusing and opaque as ever to ...many. This article develops a simplified macro-visual diagram of today's money system based on the increasingly accepted "credit theory" of money creation. It aims to explain not only how money is created and which institutions have the authority to create it; it also aims to discuss the implications of this understanding of money creation for wider issues, such as political sovereignty, inequality, and socio-economic development. Ultimately, it aims to provide a pedagogical resource upon which both technical and normative discussions about our current money system among academics, activists, and students can be based.
The study assesses the role of financial development on income inequality in a panel of 48 African countries for the period 1996–2014. Financial development is defined in terms of depth (money supply ...and liquid liabilities), efficiency (from banking and financial system perspectives), activity (at banking and financial system levels) and stability while, three indicators of inequality are used, namely, the: Gini coefficient, Atkinson index and Palma ratio. The empirical evidence is based on Generalised Method of Moments. When financial sector development indicators are used exclusively as strictly exogenous variables in the identification process, it is broadly established that with the exception of financial stability, access to credit (or financial activity) and intermediation efficiency have favourable income redistributive effects. The findings are robust to the: control for unobserved heterogeneity in terms of time effects and inclusion of time invariant variables as strictly exogenous variables in the identification process. The findings are also robust to the Kuznets hypothesis: an inverted humped shaped nexus between increasing GDP per capita and inequality. Policy implications are discussed.
The paper considers the question that has gained relevance in the last decade: whether the cryptocurrency bitcoin is money. The economic literature provides different opinions on this issue. The ...analysis shows that disagreements arise because of the different understanding of the category of ‘money’ rather than because of the nature of bitcoin. The author analyzes popular interpretations of money in terms of their applicability to the definition of the role and place of cryptocurrencies in the financial system. The purpose of this study is to define money as a financial instrument that linksthe creation of gross social product with its distribution. The author believes that money emerged and exists as a tool that ensures a connection between the contribution of each economic entity to the total product of society and the right to receive an equivalent amount of goods from this gross product. At the same time, the author defines money as an ‘ideal right’ to receive a share of the gross social product. In this regard, the analysis of bitcoin shows that this cryptocurrency allows obtaining goods from the gross social product in many countries, while bitcoin owners do not contribute to the gross social product. Based on this, bitcoin cannot be considered money; it is a money substitute, or surrogate money. At the same time, bitcoin was created as money and performs the functions of money, but to a limited extent. Bitcoin can only perform the functions of money as a supplement to an existing official currency. It is not capable of functioning as the only currency in a society. The interpretation proposed in this paper can be used for the purposes of developing the Russian law on cryptocurrencies is currently being worked on by the Government and the Central Bank of Russia.
Money laundering and terrorist financing undermine the integrity and stability of financial systems and can have a significantly adverse impact on a jurisdiction's economy. Challenges to effective ...supervision and prevention of money laundering and financing of terrorism were exacerbated in the aftermath of the 2008 financial crisis, with financial institutions' need for funds at times undermining vigilance as to the provenance of those funds. As such, supervisors often, and prudently, focused on coping with the crisis.
Since 2009, when the first edition of this handbook was published, challenges to the integrity and stability of financial systems have continued to evolve. Money-laundering and terrorist-financing risks continue to threaten the reputations of financial institutions and entire financial sectors, exposing institutions to the possibility of severe enforcement action by public authorities or the loss of correspondent relationship facilities by their private sector counterparts. This second edition reflects the evolving challenges to the integrity and stability of financial systems, recent trends in enforcement actions by country authorities, and changes to international standards, notably an emphasis on a risk-based approach.
This practical handbook supports the implementation of international standards established by the Financial Action Task Force and other bodies,
* Providing examples of money-laundering and terrorist-financing supervisory frameworks in a range of countries;
* Describing best practices for the supervision and enforcement of money-laundering and terrorist-financing laws and regulations;
* Offering practical advice on how a particular jurisdiction might incorporate enforcement of the laws and regulations on money laundering and terrorist financing into its supervisory framework.
Designed specifically for bank supervisors, this guide will also be of interest to readers working in the areas of finance, corruption prevention, law, accounting, and corporate governance.
We study optimal government debt maturity in a model where investors derive monetary services from holding riskless short-term securities. In a setting where the government is the only issuer of such ...riskless paper, it trades off the monetary premium associated with short-term debt against the refinancing risk implied by the need to roll over its debt more often. We extend the model to allow private financial intermediaries to compete with the government in the provision of short-term money-like claims. We argue that, if there are negative externalities associated with private money creation, the government should tilt its issuance more toward short maturities, thereby partially crowding out the private sector's use of short-term debt.
This paper presents the first empirical evidence in the history of banking on the question of whether banks can create money out of nothing. The banking crisis has revived interest in this issue, but ...it had remained unsettled. Three hypotheses are recognised in the literature. According to the financial intermediation theory of banking, banks are merely intermediaries like other non-bank financial institutions, collecting deposits that are then lent out. According to the fractional reserve theory of banking, individual banks are mere financial intermediaries that cannot create money, but collectively they end up creating money through systemic interaction. A third theory maintains that each individual bank has the power to create money ‘out of nothing’ and does so when it extends credit (the credit creation theory of banking). The question which of the theories is correct has far-reaching implications for research and policy. Surprisingly, despite the longstanding controversy, until now no empirical study has tested the theories. This is the contribution of the present paper. An empirical test is conducted, whereby money is borrowed from a cooperating bank, while its internal records are being monitored, to establish whether in the process of making the loan available to the borrower, the bank transfers these funds from other accounts within or outside the bank, or whether they are newly created. This study establishes for the first time empirically that banks individually create money out of nothing. The money supply is created as ‘fairy dust’ produced by the banks individually, "out of thin air".
We ask whether monetary policy plays a role in a nation’s carbon emission and how the effects vary across countries. Using a country panel covering annual data from 2000-2019 and applying the PSTR ...approach, the present paper finds that: (1) there is a nonlinear and positive association between money supply level and carbon emission; (2) the effect of monetary policy on carbon emission is weaker for countries with higher human development levels or moderate manufacturing shares of GDP, indicating that these countries are more environmentally efficient in implementing monetary policy; (3) countries with heavy manufacturing shares and/or low human development level should be cautious when carrying out economic stimulating, since such stimulating comes at higher costs of the environment. The analysis in the paper can serve as a gauge for environment-concerned central bankers when making monetary decisions and designing green monetary policy.
•There is a nonlinear and positive association between money supply levels and carbon emissions.•Higher human capital or moderate manufacturing shares exhibit weaker effects of monetary policy.•Indicates greater environmental efficiency in these countries when conducting monetary policy.•Heavy manufacturing or low human development implies high environmental costs of stimulus.•These countries should be cautious in using monetary policy for economic growth.•The analysis provides guidance for environmentally conscious central bankers.
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