Asymmetric Information and Optimal Bank Reserves
AbstractOne traditional argument in favor of bank reserve requirements holds that since a b ank and its depositors are asymmetrically informed as to the bank's reserve position and its portfolio, the bank will hold too few reserves and too risky a port folio. This being the case, presumably a central banking authority is equipped t o impose and to monitor a minimal reserve requirement yielding a Pareto superior outcome. This paper analyzes this position in the context of a formalmodel and shows that at least for some parameters of the model there is such a case for a minimal reserve requirement. Copyright 1987 by Ohio State University Press.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 19 (1987)
Issue (Month): 1 (February)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
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- Geethanjali Selvaretnam, 2005. "Optimal Reserves and Short Term Interest Rates in a Model of Bank Runs," Economics Discussion Papers 605, University of Essex, Department of Economics.
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