Journal Article

Banking strategy and credit expansion: a post-Keynesian approach

Antonio J. Alves, Gary A. Dymski and Luiz-Fernando de Paula

in Cambridge Journal of Economics

Published on behalf of Cambridge Political Economy Society

Volume 32, issue 3, pages 395-420
Published in print May 2008 | ISSN: 0309-166X
Published online December 2007 | e-ISSN: 1464-3545 | DOI: https://dx.doi.org/10.1093/cje/bem035
Banking strategy and credit expansion: a post-Keynesian approach

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  • General Aggregative Models
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  • Money and Interest Rates

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This paper aims to clarify the relationship between individual banks and banking industry behaviour in credit expansion. The authors argue that the balance sheet structure of an individual bank is only partially determined by its management's decision about how aggressively to expand credit; it is also determined by the balance sheet positions of other banks. This relationship is shown explicitly by a simple disaggregation of the variables that enter into the economy-wide money multiplier. The approach taken here revives the multi-bank approach to banking analysis pioneered by Wallace and Karmel in the 1960s, which is particularly well-suited to integrating micro and macro levels in Keynesian banking analysis.

Keywords: Banking behaviour; Banking firms; Business cycle; Credit; Post-Keynesian theory; E12; E32; E44; G21

Journal Article.  11944 words.  Illustrated.

Subjects: General Aggregative Models ; Prices, Business Fluctuations, and Cycles ; Banking ; Money and Interest Rates

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