Economic Strategy

Economic Strategy

A contemplation on the key characteristics related to common monetary arrangements and its role in designing alternative monetary arrangements

Document Type : Original Article

Authors
Mahdi Khoshkhooy 1
Hasan Sobhani 2
1 Assistant Professor, Faculty of Economics and Political Science, Shahid Beheshti University, Tehran, Iran
2 Professor of economics, University of Tehran, Tehran , Iran
10.22034/es.2025.489983.1815
Abstract
During the last century, many economic studies have come out in the position of criticizing and evaluating the conventional monetary and banking system, and sometimes they have also presented an alternative monetary system. In the meantime, we see many differences in the proposed monetary views and analyses, one of the important causes of which can be attributed to different perceptions of the way conventional bank’s function and play a role in the current Money supply in economy. Therefore, it seems that the category of "bank money creation" and related mechanisms need more analysis and clarification. With the aim of gaining a correct insight into the design requirements of alternative monetary arrangements, the present study examines the characteristics and processes related to current bank money creation. For this purpose, while pointing out the important questions and ambiguities that can be raised in this field, three key elements of this field including "bank money creation", "bank money creation from nothing" and "nature and function of commercial bank" are taken into consideration. Based on the results of this study, it is necessary to provide alternative monetary arrangements along with answers to related key questions, based on a correct understanding of the "nature of the bank" and its individual and collective functions in the conventional monetary system, to define the function(s) You have to pay for it. Then, if it is decided to completely eliminate the possibility of creating bank money in the new monetary arrangements, it is necessary to distinguish between the two characteristics of "money creation from nothing" and "bank money creation" and to understand their functional nature, to explain the role of each in creating Power of "bank money creation" for banks.
Keywords
Bank money creation
Fractional reserve banking
Money creation from nothing
Alternative monetary arrangement
Subjects
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  • Receive Date 23 November 2024
  • Revise Date 02 December 2024
  • Accept Date 13 January 2025