Keynes and Fractional Reserve Banking: The NPV vs. MEC

Modeling the Textbook Fractional Reserve Banking System

Banking systems based on the fractional reserve banking process have been in use for several hundred years. However textbook models of these systems do not include either loan repayments or loan defaults, and predict the evolution over time of a stable, asymptotically converging process governing credit and money supplies to the general economy for which there is no empirical evidence in long r...

On the social usefulness of fractional reserve banking

In this paper we argue that if monetary policy has insufficient deflation, private agents have incentives to set up alternative payment systems like fractionally backed bank deposits, which pay interest on the means of payment. In a competitive environment with free entry, these alternative systems are inherently fragile in the sense that they are subject to socially costly bank runs. These soc...

AgAinst MonetAry DisequilibriuM theory AnD FrActionAl reserve Free bAnking

The theory of monetary disequilibrium, as espoused by Selgin (1988), White (1989), Horwitz (2000), and others, has been used to justify the issuance of fiduciary media under a system of fractional reserve “free” banking. The present paper examines this monetary disequilibrium theory and concludes that it contains numerous errors and logical fallacies. The foundational economic argument in favor...

Assessing the Costs of Fractional Reserve Banking: A Theoretical Exposition and Examination of Post-Meiji Japan

Comparative analysis of the effects of monetary and government financial expenditures shocks in the context of fractional and full reserve banking in Iran: DSGE approach

The present study aims to investigate the effects of monetary and financial shocks on macroeconomic variables in fractional and full reserve banking conditions. To this end, two stochastic dynamic general equilibrium models have been designed in terms of the realities of Iran's economy and then the effects of shocks have been studied. After determining the input values ​​of the model and estima...