Banking theories and macroeconomics
2018
Mainstream models that allow for financial operations are characterized by the understanding of banks as intermediaries of outside money (IOM). This approach to banks became dominant thanks to a peculiar rhetorical device by Tobin (1963). In recent years, however, this understanding is being increasingly questioned and an old view of banks as originators of inside money (OIM) is being reconsidered. The present article highlights the fundamental differences of these alternative doctrines from a money supply perspective and provides a simple theoretical argument to consider the limits of a point of view a la Tobin and regard the OIM banking theory more general than the IOM theory.
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