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On the Optimality of Reserve Requirements / Richard D. Cothren, Roger N. Waud.
- Format:
- Book
- Author/Creator:
- Cothren, Richard D.
- Series:
- Technical Working Paper Series (National Bureau of Economic Research) no. t0101.
- NBER technical working paper series no. t0101
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1991.
- Summary:
- An implicit rationale for a bank reserve requirement is that a central monetary authority is in a unique position (as "social planner) to impose a "socially superior" outcome to that yielded by a free banking system. We illustrate how this can be true in the context of a simple economy modeled to mimic certain basic characteristics of a monetary economy with banks and agents who trade with one another. Banks exist in our model because by pooling liquidation risks they provide liquidity otherwise unavailable to depositors, which, in turn, provides the incentive - for using deposit claims as the medium of exchange.
- Notes:
- Print version record
- April 1991.
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