Working Paper No. 15-20 on the Welfare Properties of Fractional Reserve Banking
نویسندگان
چکیده
Monetary economists have long recognized a tension between the bene ts of fractional reserve banking, such as the ability to undertake more pro table (long-term) investment opportunities, and the di¢ culties associated with it, such as the risk of insolvency for each bank and the associated losses to bank liability holders. I show that a speci c banking arrangement (a joint-liability scheme) provides an e¤ective mechanism for ensuring the ex-post transfer of reserves from liquid banks to illiquid banks, so it is possible to select a socially e¢ cient reserve ratio in the banking system that preserves the safety of bank liabilities as a store of value and maximizes the rate of return paid to bank liability holders. Keywords: fractional reserve banking, reserve management, risk sharing JEL classi cations: E42, G21
منابع مشابه
Working Paper No. 13-32 on the Welfare Properties of Fractional Reserve Banking
Monetary economists have long recognized a tension between the bene ts of fractional reserve banking, such as the ability to undertake more pro table (long-term) investment opportunities, and the di¢ culties associated with fractional reserve banking, such as the risk of insolvency for each bank. The goal of this paper is to show that a speci c form of private bank coalition (a joint-liability ...
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