Monetary Policy and Banking Structure

Tarishi Matsuoka

Journal of Money, Credit and Banking, 2011, vol. 43, issue 6, 1109-1129

Abstract: In this paper, I examine the differences in optimal monetary policy in various banking systems. In particular, I compare two monetary economies: one with a competitive banking system and the other with a monopolistic one. In addition, the optimality of the discount window policy is considered. It is shown that the Friedman rule is the optimal monetary policy in a monopolistic banking economy, and the zero‐inflation policy is optimal in a competitive banking economy under appropriate parameters. In addition, the combination of the Friedman rule and the discount window policy can achieve efficient allocation in both banking systems.

Date: 2011
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https://doi.org/10.1111/j.1538-4616.2011.00419.x

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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:43:y:2011:i:6:p:1109-1129

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