A New Financial System for Poverty Reduction and Growth

43 Pages Posted: 3 Feb 2006

See all articles by Biagio Bossone

Biagio Bossone

BRASS on Finance, Ltd; The Group of Lecce

Abdourahmane Sarr

International Monetary Fund (IMF)

Date Written: October 2002

Abstract

Our proposal draws on the premise that the availability of stable demand deposits for bank lending, in the process of which inside money is created, does not require any act of intentional saving. The mechanism allowing banks to lend deposits does not function well in low-income countries, owing to a number of structural constraints. We argue that separating inside money creation from lending, and distributing it on a nonlending basis to depositors through specialized payment service institutions, could broaden access to financial resources, fuel non-inflationary, demand-led growth; and foster financial deepening, diversification, and stability. We also argue that the proposed reform is consistent with market incentives and sound economic management.

Keywords: Banks Credit Deposits Finance Growth Inside Money Poverty Reduction

JEL Classification: E2 E3 E4 E5 G2 G31 G32 G33

Suggested Citation

Bossone, Biagio and Sarr, Abdourahmane, A New Financial System for Poverty Reduction and Growth (October 2002). IMF Working Paper No. 02/178, Available at SSRN: https://ssrn.com/abstract=880243

Biagio Bossone (Contact Author)

BRASS on Finance, Ltd ( email )

B2, Industry St.
Qormi, 3000
Malta

The Group of Lecce ( email )

Lecce
Lecce, 73100
Italy

Abdourahmane Sarr

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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