The Banking Sectors

Harland Wm. Whitmore

Chapter 9 in The World Economy, Population Growth, and the Global Ecosystem, 2007, pp 141-166 from Palgrave Macmillan

Abstract: Abstract Country One’s private financial sector purchases and holds bonds issued in all three countries. The bonds it holds at the beginning of the current period generate income during the current period. The bonds it buys during the current period do not generate interest income until next period. To finance their purchases of interest-earning assets, Country One’s private financial sector issues noninterest-earning checkable deposits denominated in its country’s unit of account to its household customers. The sector incurs labor costs associated with servicing both its bond holdings and its checking account liabilities. Furthermore, because the checkable deposits are transferable into Country One’s coin and currency on demand, the private banks in Country One hold excess reserves in the form of vault cash and/or deposits held at their central bank to reduce the transactions costs associated with servicing these accounts. The private financial sector is required to hold reserves equal to the required reserve ratio (set by its central bank) times the volume of its demand-deposit liabilities. For simplicity, the private financial sector’s ability to borrow from the central bank is ignored here.

Keywords: Central Bank; Banking Sector; Current Period; Private Bank; Interest Income (search for similar items in EconPapers)
Date: 2007
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:pal:palchp:978-0-230-60730-9_9

Ordering information: This item can be ordered from
http://www.palgrave.com/9780230607309

DOI: 10.1057/9780230607309_9

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().