The real effects of reserve requirements : [Version February 1998]
- We review arguments for and against reserve requirements and conclude that the main question is whether a distinction between money creation and intermediation can be made. We argue that such a distinction can be made in a money-in-advance economy and show that if the money-in-advance constraint is universally binding then reserve requirements on checkable accounts have no effect on intermediation. We then proceed to show that in a model in which trade is uncertain and sequential, a fractional reserve banking system gives rise to endogenous monetary shocks. These endogenous monetary shocks lead to fluctuations in capacity utilisation and waste. When the moneyin-advance constraint is universally binding, a 100% reserve requirement on checkable accounts can eliminate this waste.
Author: | Benjamin Bental, Benjamin Eden |
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URN: | urn:nbn:de:hebis:30:3-229402 |
Parent Title (German): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 1998,18 |
Series (Serial Number): | CFS working paper series (1998, 18) |
Document Type: | Working Paper |
Language: | English |
Year of Completion: | 1998 |
Year of first Publication: | 1998 |
Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2011/10/18 |
Tag: | Reserve requirements; intermediation; monetary shocks; money creation |
Issue: | Version February 1998 |
Page Number: | 47 |
HeBIS-PPN: | 280079125 |
Institutes: | Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Licence (German): | Deutsches Urheberrecht |