Monetary Policy and Financial Intermediation

Timothy Fuerst

Journal of Money, Credit and Banking, 1994, vol. 26, issue 3, 362-76

Abstract: This paper develops a general equilibrium model of monetary nonneutrality that is a natural result of three basic assumptions: (1) financial intermediaries face reserve requirements on deposits, (2) financial intermediaries are the conduit for central bank monetary injections, and (3) monetary injections are not initially subject to reserve requirements. This asymmetry on the imposition of reserve requirements. This results in stochastic monetary injections being expansionary. The model also gives rise to an endogenous money multiplier because some purchases are made with cash while others with checking accounts, and the cash versus check composition of total purchases varies with the aggregate shocks. Copyright 1994 by Ohio State University Press.

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:26:y:1994:i:3:p:362-76

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