Money and Banking: Theory and Evidence

Mayer, Colin (1994) Money and Banking: Theory and Evidence. Oxford Review of Economic Policy, 10 (4). pp. 1-13.

Abstract

This issue of the Oxford Review is concerned with money and banking. The articles in the issue provide a comprehensive overview of recent developments in the literature. They systematically evaluate both the theoretical and empirical literature on banks, the monetary transmission mechanism, the operation of financial systems and bank regulation both in a domestic and an international context. 'Does money matter?' has been a favourite question posed by academic economists for several decades. While the question has not changed, the answer has. During the 1950s and 60s, the conventional view was that it does matter; during the 1970s
and 80s, the influence of monetary policy on real as opposed to inflationary developments came to be increasingly questioned. The consensus in the 1990s has swung back a few decades to the view that money does matter. A new twist to the story, which did not feature prominently in the 1950s and 60s debate, is that banks, as well as money, matter. Of course, there were several authors such as Gurley and Shaw
(1960) who pointed to the importance of banks in the monetary transmission mechanism. However, it is really only in the last decade that economic theorists have turned their attention to the rationale for and the special role of banks. The irony of this is that the theoretical justification for banks is appearing just at the moment when many commentators point to the demise of banks in the face of such close substitutes as corporate bond markets, money market funds, and contingent securities.

Item Type: Article
Keywords: Banks; Capital; Economic Theory
Subject(s): Finance
Centre: Faculty of Finance
Date Deposited: 26 Feb 2012 15:25
Last Modified: 23 Oct 2015 14:06
URI: http://eureka.sbs.ox.ac.uk/id/eprint/2539

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