Document Type : Research Article

Authors

• Ali Reza Navabpour ¹
• Mohammad Talebi ²
• Hosin Hasanzadeh Sarvestani ³
• Mahdi Nouri ⁴

¹ PhD student in finance, Imam Sadiq University

² Management Faculty of Imam Sadiq University

³ Assistant Professor, Department of Finance, Maaf Islamic Faculty and Management, Imam Sadiq University, Tehran, Iran

⁴ National Virtual Space Center

Abstract

Understanding the processes of money creation in the banking system is crucial from both monetary policy and jurisprudential perspectives. Comprehending theories of money creation enhances the understanding of conventional banking systems and facilitates the derivation of relevant legal and jurisprudential interpretations. Following the 2009 global financial crisis, reevaluating established theories and analyzing their alignment with the practical realities of banking became increasingly essential.



This study employs a systematic review method, analyzing 178 articles published between 2009 and 2023. The objective was to examine the acceptance of money creation theories by scholars and experts in the field post-financial crisis. The selected articles encompass theoretical and empirical research on banking systems and investigate the trends in the adoption of these theories within the specified timeframe.



The results indicate that despite the widespread use of the financial intermediation and fractional reserve theories in academic literature and scholarly discussions, their acceptance has significantly declined after 2009. Less than 10% of the reviewed articles supported the financial intermediation or fractional reserve theories, while 90% endorsed the credit creation theory as a more accurate interpretation of banking processes.



This study demonstrates that the credit creation theory, due to its greater alignment with practical realities, has been widely recognized by the majority of researchers. These findings underscore the need to revise monetary policies and jurisprudential interpretations and contribute to refining conventional perspectives on the banking system.

Keywords

• Money Creation
• Fractional Reserve Theory
• Financial Intermediation Theory
• Credit Creation Theory
• Systematic Review
• Banking

Main Subjects

• Islamic Banking