Since the global financial crisis in 2008, there has been an elevated interest in private debt and as a macroeconomic variable. In light of the lack of high-frequency data, this study presents a unique monthly time series dataset on credit from and deposits in Swedish commercial banks from 1875 to 2020, covering 1,752 monthly observations and most of Swedish commercial banking history. In a first application, the study examines to what extent money in Sweden has been exogenous, created independently of demand by the central bank, or endogenous, created in response to demand by commercial banks, during different institutional settings. The results, derived via cointegration and impulse-response functions, show that though the relationship between deposits and credit has changed over time, both theories often hold validity simultaneously. While changes in deposits often have had significant impact on credit, the opposite has also been true. There are, however, differences between different regulatory regimes, as well as for different groups of banks.

For several years leading up to the 2008 financial crisis, Australia registered a public surplus, and this was generally interpreted as the result of responsible fiscal policy. However, since the outbreak of that crisis, no such fiscal balance has again been attained, giving rise to a range of explanations from the political incapacity of governments to the weak economic behaviour characterising the post-crisis era. Noteworthy in any case is that analysts have failed to cite the importance of a factor that was key to reaching pre-crisis surpluses: the vertiginous growth of private debt. This work argues that it was precisely the intense granting of bank loans and consequent increased demand from the private sector that boosted economic activity and led to the generation of public income sufficient to feed the fiscal surpluses of that period. Indeed, according to the proposals of Wynne Godley, this would have been the only way to register a public surplus in a context of current account deficits, typical of the Australian economy. This paper considers whether Australian private debt played a significant role in achieving fiscal surplus by way of a review of the Australian real estate boom and public accounts from the 1990s onward, also estimating an econometric model of autoregressive vectors to explore the link between these two variables. The results obtained appear to corroborate the hypothesis: severe private borrowing contributed to Australia’s fiscal surpluses. This finding has significant implications for budgetary policy.

This paper analyzes the role and importance of “inside” money, made out of commercial banks' liabilities, for a New Keynesian model of the type commonly used for monetary policy analysis. The active role of inside money stems from its unique role in allowing payment for at least some consumption goods; shocks to the production of inside money may therefore have real effects. A calibrated version of the model is shown to generate small, but nonnegligible effects of inside money shocks on output and inflation. Moreover, the presence of inside money in the model leads to a slight attenuation of the effect of technology and monetary policy shocks. Finally, it is found that it is optimal for monetary policy to react to inside money shocks, but reacting to inflation alone does not result in a significant loss of household welfare.