The real effects of reserve requirements
- 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 money-in-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:30-30963 |
Publisher: | [Verlag nicht ermittelbar] |
Place of publication: | [Erscheinungsort nicht ermittelbar] |
Document Type: | Report |
Language: | English |
Date of Publication (online): | 2006/08/25 |
Year of first Publication: | 1998 |
Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2006/08/25 |
Tag: | Intermediation; Monetary Shocks; Money Creation; Reserve Requirements |
HeBIS-PPN: | 44152396X |
Institutes: | Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Licence (German): | Archivex. zur Lesesaalplatznutzung § 52b UrhG |