Central Banking & Monetary Policy: An Introduction

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By Bost University Posted on Feb 21, 2021
In Category - BBA
Prof. Dr AP Faure 978-87-403-0605-7 Books at bookboon.com 2013

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To state that the central bank plays a significant role in the financial system and the real economy is a striking understatement. Because the public generally regards bank deposits (BD) as the means of payments / medium of exchange [notes and coins (N&C) are small in comparison and will soon disappear], BD is money. It follows that because BD is money, banks are able to create BD simply by making loans [marketable debt (MD) and non-marketable debt (NMD)]. This arrangement, while liberating (in terms of there not being a shortage) when compared with the days when money was made of precious metals (and therefore in short supply), is associated with a few problems:

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