Private Money and Reserve Management in a Random-Matching Model

Citations Over Time

Abstract

In this paper, we develop a model of money and reserve-holding banks. We allow for private liabilities to circulate as media of exchange in a random-matching framework. Some individuals, which we identify as banks, are endowed with a technology to issue private notes and to keep reserves with a clearinghouse. Bank liabilities are redeemed according to a stochastic process that depends on the endogenous trades. We find conditions under which note redemptions act as a force that is sufficient to stabilize note issue by the banking sector.

Related Papers

• Excess Reserves in the 1930s: A Precautionary Tale(2010)
• The effects of lower reserve requirements on money market volatility(1993)
• Defining the adjusted monetary base in an era of financial change(1996)
• → Reserves, Reserve Requirements, and Reserves Management(2021)