Multiple reserve requirements in a monetary growth model

Pedro Gomis-Porqueras

Economic Theory, 2002, vol. 19, issue 4, 810 pages

Abstract: This paper considers a monetary growth model in which banks provide liquidity, and in which a government finances a deficit by printing money and selling bonds. In this context, I examine the possibility that the government may want to impose binding reserve requirements on banks' holdings of both money and government bonds. Conditions are established under which doing so increases steady state welfare and reduces the scope for indeterminacies. Furthermore, under a binding system of multiple reserve requirements we have that money is superneutral. On the other hand, if reserve requirements are imposed on cash holdings alone, increases in the steady state inflation rate adversely affect capital accumulation and long run real activity. Thus systems of multiple binding reserve requirements can insulate real activity from the consequences of inflationary taxation.

Keywords: Spatial separation; Reserve requirements. (search for similar items in EconPapers)
JEL-codes: E44 E52 (search for similar items in EconPapers)
Date: 2002-02-06
Note: Received: June 30, 2000; revised version: January 31, 2001
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.de/link/service/journals/00199/papers/2019004/20190791.pdf (application/pdf)
Access to the full text of the articles in this series is restricted

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:spr:joecth:v:19:y:2002:i:4:p:791-810

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().