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Do Shadow Banks Create Money? ‘Financialisation’ and the Monetary Circuit

Michell, Jo


Jo Michell
Associate Professor in Economics


© 2016 John Wiley & Sons Ltd The rise of the shadow banking system is viewed through the theoretical lens of Graziani's Monetary Theory of Production. Graziani's categories of ‘initial finance’ and ‘final finance’ are used to analyse the new forms of credit created in the shadow banking sector. It is argued that the accumulation of leverage in the shadow banking system and the creation of credit money by the traditional banking sector are symbiotic processes. While Graziani's triangular debtor-bank-creditor relationship remains central, the circuit operates in a perverse form in which household debt is stored on the balance sheets of shadow banks, allowing the banking system to break the historical connection between money creation and productive activity.


Michell, J. (2017). Do Shadow Banks Create Money? ‘Financialisation’ and the Monetary Circuit. Metroeconomica, 68(2), 354-377.

Journal Article Type Article
Acceptance Date Feb 1, 2016
Online Publication Date Sep 28, 2016
Publication Date May 1, 2017
Journal Metroeconomica
Print ISSN 0026-1386
Electronic ISSN 1467-999X
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 68
Issue 2
Pages 354-377
Keywords shadow banks, monetary circuit, Graziani, financialiasation, money
Public URL
Publisher URL
Additional Information Additional Information : This is the peer reviewed version of the following article: Michell, J. (2017) Do shadow banks create money? ‘Financialisation’ and the monetary circuit. Metroeconomica, 68 (2). pp. 354-377, which has been published in final form at This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.


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