Money, Credit, and Business Fluctuations

45 Pages Posted: 19 Jun 2004 Last revised: 20 Sep 2010

See all articles by Joseph E. Stiglitz

Joseph E. Stiglitz

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: 1989

Abstract

This paper provides a critique of standard theories of money, in particular those based on money as a medium of exchange. Money is important because of the relationship between money and credit. The process of judging credit worthiness, in which banks play a central role, involves the collection and processing of information. Like many other economic activities involving information, these processes are not well described by means of standard production functions. Changes in economic circumstances can have marked effects on the relevance of previously accumulated information and accordingly on the supply of credit. Changes in the availability of credit may have marked effects on the level of economic activity, while changes in real interest rates seem to play a relatively minor role in economic fluctuations. This alternative view has a number of implications for policy, both at the macro-economic level (for instance, on the role of monetary policy for stabilization purposes and the choice of targets) and at the micro-economic level.

Suggested Citation

Stiglitz, Joseph E., Money, Credit, and Business Fluctuations (1989). NBER Working Paper No. w2823. Available at SSRN: https://ssrn.com/abstract=447234

Joseph E. Stiglitz (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
814 Uris Hall
New York, NY 10027
United States
(212) 854-0671 (Phone)
(212) 662-8474 (Fax)

HOME PAGE: http://www.josephstiglitz.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
61
Abstract Views
747
rank
353,580
PlumX Metrics