The Determination of Monetary Aggregates and Interest Rates

Mitsuru Iwamura
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Mitsuru Iwamura: Manager and Senior Economist, Research Division 1, Institute for Monetary and Economic Studies, Bank of Japan

Monetary and Economic Studies, 1992, vol. 10, issue 1, 65-93

Abstract: This paper is concerned with a perfectly competitive equilibrium model of the money market under the assumption of increasing marginal costs for both deposits and loans. This model illustrates a determination mechanism of monetary aggregates and interest rates. As this novel assumption of increasing marginal costs is not widely adopted in the literature, this paper discusses, at some length, how marginal costs can be considered to increase with the size of deposits by employing the results from the queuing theory.

Date: 1992
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Persistent link: https://EconPapers.repec.org/RePEc:ime:imemes:v:10:y:1992:i:1:p:65-93

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