resources in the form of deposits. Therefore, bank credit needs to be modelled as a monetary phenomenon, which directly fuels … lend, the bank does not have to raise deposit rates or significantly increase borrowing from abroad as deposit dynamics … closely resembles that of credit, which allows us to analyse real and nominal consequences of bank credit (and money) creation. …

-run supply of bank credit. As U.S. bond rates have fallen, the pass-through of monetary shocks to loan and deposit rates has … weakened while the spread on U.S. bank loans has risen. I build a model in which banks earn deposit and loan spreads, deposits … dampened at low rates, because deposit spreads act as a better hedge for bank equity against unexpected monetary shocks. In the …