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The Reserve Bank, private sector banks and the creation of money and credit.
- Article from:
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The Reserve Bank of New Zealand Bulletin
- Article date:
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March 1, 2008
- Author:
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Copyright informationCOPYRIGHT 2008 Reserve Bank of New Zealand. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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This article provides an overview of the functions of money, and how money and credit are created in the economy. The roles of the Reserve Bank and private sector banks are illustrated, and we explain the link between money and monetary policy.
1 Introduction
Money and credit, the products of the financial system, are important parts of our economy. The financial system enables 'real' activity--that is, the processes of production and trade of goods and services--to take place smoothly. Financial activity is thus part and parcel of economic growth and improvement in overall living standards. (1)
Money itself is not a modern innovation. Records of money date back 5,000 ...
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