Acta Oeconomica Pragensia 2013, 21(6):21-44 | DOI: 10.18267/j.aop.419

The Influences of Financial Institutions and the Money Circulation Mechanism on Business Cycles: The Case of the USA

Jiří Štekláč
Vysoká škola ekonomická v Praze, Národohospodářská fakulta (steklacek@seznam.cz).

The aim of this paper is to analyze the structure of the current financial system, including money circulation in it, and define its influence on business cycles. The paper examines causes of disturbances in money circulation which lead to shallow or even deep economic crises. The role of central banks is marginal. The author concludes that proper functioning of the current financial system is subject to constant credit growth. If credit growth is insufficient, the system collapses due to money hoarding and other disorders in money circulation. It causes inability to repay the debts, which results in uncertainty and reduces aggregate demand. The entire study is based on US data.

Keywords: banks and other depository institutions, money supply, monetary policy, business cycle
JEL classification: E32, E51, E52, G21

Published: October 1, 2013  Show citation

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Štekláč, J. (2013). The Influences of Financial Institutions and the Money Circulation Mechanism on Business Cycles: The Case of the USA. Acta Oeconomica Pragensia, 21(6), 21-44. doi: 10.18267/j.aop.419
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