EconPapers    
Economics at your fingertips  
 

Government Bonds, Bank Liquidity and Non-Neutrality of Monetary Policy in the Steady

Tianxi Wang

Economics Discussion Papers from University of Essex, Department of Economics

Abstract: This paper studies non-neutrality of monetary policy in a model where fiat money is used by banks to meet liquidity demand and a government bond to collateralize reserve borrowing. It finds that if some banks are liquidity constrained, any monetary policy that alters the bond-to-fiat money ratio moves the interbank rate and is non-neutral in the steady state. Moreover, the effect for liquidity un-constrained banks is the opposite of that for the maximally constrained. Lastly, if the expansion of digital ways of payment eliminates depositor withdrawals, fiat money will stop circulation and a bullion standard will probably return.

Date: 2021-01-12
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cwa, nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://repository.essex.ac.uk/29502/ original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:esx:essedp:29502

Ordering information: This working paper can be ordered from
Discussion Papers Administrator, Department of Economics, University of Essex, Wivenhoe Park, Colchester CO4 3SQ, U.K.

Access Statistics for this paper

More papers in Economics Discussion Papers from University of Essex, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Essex Economics Web Manager ().

 
Page updated 2025-03-19
Handle: RePEc:esx:essedp:29502