Banks are not reserve-constrained and the deposit multiplier does not recognise that modern central banks target
interest rates
The quantity of reserves is therefore a consequence, not a cause, of lending and money creation.
” In the real world, banks provide financing through money creation. That is they create deposits of new money through lending, and in doing so are mainly constrained by profitability and solvency considerations.”
Working Paper No. 529.
Banks are not intermediaries of loanable funds – and why this matters »
– Zoltan Jakab and Michael Kumhof