Money and Banking in a Cash-in-Advance Economy
This paper studies banking and financial innovations in a stochasti c general equilibrium model, assuming the existence of two distinct types of goods: cash goods, which can only be purchased by cash, and check goods, which can also be purchased by checks drawn against interest-bearing bank accounts. The authors analyze the effects of changes in the payment s structure (i.e., the share of check goods), reserve requirements on banks, and changes in the supply of reserves. The authors find, e.g., that an increased share of check goods and a decrease of the bank reserve ratio in general both lead to a decrease in the variance of the price level. Copyright 1988 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
Volume (Year): 29 (1988)
Issue (Month): 4 (November)
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