Macroeconomics: Institutions, Instability, and the Financial System av Wendy (Professor of Economics University College London) Carlin, David (School

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This authoritative new textbook integrates the modern monetary framework, based on the 3-equation model of the demand side, the supply side and the policy maker, with a model of the financial system. As a result, the authors comprehensively address the limitations of the mainstream macroeconomic model exposed by the financial crisis and the Eurozone crisis.The book guides the reader through the three principal steps required to integrate the financial system within the macroeconomic model.Firstly, the authors examine how the margin of the lending rate over the policy rate is set in the commercial banking sector, how money is created in a modern banking system and how the central bank can take account of the working of the banking system in order to achieve its desired policy outcome.Secondly, the authors explore the characteristics of the financial system that result in vulnerability to a financial crisis, with implications for fiscal balance. The economy depends on the continuity of c