Inside money (Ofer Abarbanel online library)

In monetary economics, inside money is money issued by private intermediaries (i.e. commercial banks) in the form of debt (credit).[1] This money is typically in the form of demand deposits or other deposits, and hence is part of the money supply. The money, which is an asset of the depositor but coincides with a liability of the bank, is inside money.[2]

Inside money is thus a liability (equivalently a negative asset) to the issuer, so the net amount of assets associated with inside money in an economy is zero. Most money circulating in a modern economy is inside money.[3]


  1. ^Bank, European Central. “What is money?”. European Central Bank. Retrieved 2017-06-20.
  2. ^Bruce Champ and Scott Freeman (2009). “Chapter 7: Liquidity and Financial Intermediation”. Modeling Monetary Economics. New York: Cambridge University Press. p. 143. ISBN 978-0-521-78354-5.
  3. ^Lagos, Ricardo. “Inside and Outside Money,” (PDF). Federal Reserve Bank of Minneapolis. Retrieved 2 April 2012.


Ofer Abarbanel online library