We provide a rationale for bank money creation in our current monetary system by investigating its merits over a system …) costs from monitoring, aggregate lending to bank-dependent firms is inefficiently low. A monetary system with bank money … creation alleviates this problem, as banks can initiate lending by creating bank deposits without relying on household funding …

access traditional bank lending. Using European firm-level data on SME access to finance since the onset of the financial … crisis, we find that bank-lending constrained SMEs are significantly more likely to avail of alternative forms of external …