What the study found
The study argues that bank lending creates deposits, but that this outcome is not best explained as creating money “out of thin air” or as merely a matter of double-entry accounting.
Why the authors say this matters
The authors say a forgotten explanation from two late nineteenth- and early twentieth-century scholars can easily demonstrate how lending creates deposits, and they present this as a better explanation than the ones used in recent macroeconomics literature.
What the researchers tested
The article is a historical re-examination of a recent macroeconomic argument about commercial banks, deposits, and loans. The author compares the recent literature’s interpretation with an older explanation from two earlier scholars.
What worked and what didn't
The abstract says recent work argues that lending itself creates deposits. The author says neither the “out of thin air” interpretation nor the double-entry accounting interpretation satisfactorily explains this outcome, and that the forgotten earlier explanation does.
What to keep in mind
The abstract does not provide details about data, examples, or specific evidence used in the re-examination. It also does not describe limitations beyond noting that the earlier interpretations are, in the author’s view, unsatisfactory.
Key points
- The article argues that bank lending creates deposits.
- The author rejects two common explanations: “out of thin air” and double-entry accounting.
- A forgotten explanation from two earlier scholars is presented as the better account.
- The paper is a historical re-examination of a recent macroeconomic debate.
Disclosure
- Research title:
- Lending creates deposits, according to a historical re-examination
- Authors:
- Alex Young
- Institutions:
- Hofstra University
- Publication date:
- 2026-04-02
- OpenAlex record:
- View
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