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