Abstract
<p>The paper aims to introduce ethical remarks into the monetary circuit (or monetary theory of production)<br />approach in order to study the mechanism of money creation when banks discriminate production on an ethical<br />plane. By the micro-foundation of the banks’ and firms’ behaviour, it will be shown that the ethical<br />discrimination of firms by banks is implemented by the differentiation of the mark-ups on the loan rate and how<br />this discrimination leads the system to create different credit markets according to the capacity (or willingness)<br />of firms to satisfy (or not) the ethical claims of the banks.</p>
Highlights
The social responsibility of firms is a term used in modern economies to qualify firms’ proclivity to embody in their objective function the well-being of a wide range of stakeholders, such as workers, suppliers, local community, consumers and so on
Within the debate on the social implications of business activities, the one revolving around credit plays a significant role. This is due to the increasing awareness of the social implications of financing and the effects related to the exclusion from the traditional credit market of those who are subject to the market interest rate and that are lacking in collateral
By the micro-foundation of the banks’ and firms’ behaviour, we show that the ethical discrimination of firms by banks is implemented by the differentiation of the mark-ups on the loan rate and how this discrimination leads the system to create different credit markets according to the capacity of firms to meet the ethical claims of the banks
Summary
The social responsibility of firms is a term used in modern economies to qualify firms’ proclivity to embody in their objective function the well-being of a wide range of stakeholders, such as workers, suppliers, local community, consumers and so on. Vol 11, No 7; 2016 behavior of banks by the grafting of moral codes into their behavior By this we show that socially responsible banks are able to discriminate production planes, differentiating the mark-up and in turn the loan rate. This discrimination leads the system to create two kinds of credit markets, affecting the amount of financing.
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