Money, reserves, and the transmission of monetary policy: Does the money multiplier exist?

Seth Carpenter and Selva Demiralp

Journal of Macroeconomics, 2012, vol. 34, issue 1, 59-75

Abstract: With the use of non-traditional policy tools, the level of reserve balances has risen in the US from roughly $20 billion before the financial crisis to well past $1 trillion. The effect of reserve balances in macroeconomic models often comes through the money multiplier, affecting the money supply and the bank lending. In this paper, we document that the mechanism does not work through the standard multiplier model or the bank lending channel. If the level of reserve balances is expected to have an impact on the economy, it seems unlikely that a standard multiplier story will explain the effect.

Keywords: Monetary transmission mechanism; Money multiplier; Lending channel (search for similar items in EconPapers)
JEL-codes: E51 E52 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (66)

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Working Paper: Money, reserves, and the transmission of monetary policy: does the money multiplier exist? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:34:y:2012:i:1:p:59-75

DOI: 10.1016/j.jmacro.2011.09.009

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