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 |
|---|---|
| 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 |
