Essays on Economic Policy (ESPE in Spanish) - On the Social Value of Banks
In the journal Essays on Economic Policy (ESPE) - we disclose the results and policy proposals that arise from academic research carried out at the Banco de la República. When you read us, always keep in mind that the content of our articles, as well as the analyzes and conclusions derived from them, are the sole responsibility of their authors. The material disclosed in our ESPE magazine does not compromise or represent the opinion of Banco de la República or that of its Board of Directors.
I compare the utility of individuals in an economy with and without banks. To make the comparison interesting, the economy without banks has cashin-advance money that the individuals use for consumption and for precautionary (emergency) purposes and that firms use to pay their wage bill. In the economy with banks, the precautionary funds are deposited in banks, which lend this money to firms for working capital. In these economies output is generally higher, people have higher utility and live longer. Also, the price level is usually higher.
