Macroeconomic stability in a free banking system
This paper uses a simple general equilibrium banking model to examine how permitting banks to issue notes might affect macroeconomic stability. Adding banknotes to the menu of available liabilities alters the interest sensitivities of bank security and deposit choices. This changes the slope of the economy's LM schedule and the magnitude of its displacement in the face of financial market disturbances. However, the theoretical directions of these changes that free banking would induce are ambiguous. While empirical evidence permits some speculation that free banking actually could reduce stability in the face of expenditure (IS) shocks, the key point of this paper is that any theoretical case favoring free banking cannot rest on an argument that free banking unambiguously would stabilize equilibrium nominal income. Copyright International Atlantic Economic Society 1997
Volume (Year): 25 (1997)
Issue (Month): 4 (December)
|Contact details of provider:|| Web page: http://www.springer.com|
Postal:Suite 650, International Tower, 229 Peachtree Street, N.E., Atlanta, GA 30303
Phone: (404) 965-1555
Fax: (404) 965-1556
Web page: http://www.iaes.org/
More information through EDIRC
|Order Information:||Web: http://www.springer.com/economics/journal/11293/PS2|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Selgin, George, 1994. "Free Banking and Monetary Control," Economic Journal, Royal Economic Society, vol. 104(427), pages 1449-1459, November.
- William Poole, 1969.
"Optimal choice of monetary policy instruments in a simple stochastic macro model,"
Special Studies Papers
2, Board of Governors of the Federal Reserve System (U.S.).
- William Poole, 1970. "Optimal choice of monetary policy instruments in a simple stochastic macro model," Staff Studies 57, Board of Governors of the Federal Reserve System (U.S.).
- King, Robert G., 1983. "On the economics of private money," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 127-158.
- Cothren, Richard D & Waud, Roger N, 1994. "On the Optimality of Reserve Requirements," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(4), pages 827-838, November.
- Richard D. Cothren & Roger N. Waud, 1991. "On the Optimality of Reserve Requirements," NBER Technical Working Papers 0101, National Bureau of Economic Research, Inc.
- Gordon, David B & Leeper, Eric M, 1994. "The Dynamic Impacts of Monetary Policy: An Exercise in Tentative Identification," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1228-1247, December.
- David B. Gordon & Eric M. Leeper, 1992. "The dynamic impacts of monetary policy: an exercise in tentative identification," FRB Atlanta Working Paper 92-13, Federal Reserve Bank of Atlanta.
- David B. Gordon & Eric M. Leeper, 1993. "The dynamic impacts of monetary policy: an exercise in tentative identification," FRB Atlanta Working Paper 93-5, Federal Reserve Bank of Atlanta.
- Richard H. Timberlake, 1986. "Institutional Evolution of Federal Reserve Hegemony," Cato Journal, Cato Journal, Cato Institute, vol. 5(3), pages 743-769, Winter.
- Hutchison, David E, 1995. "Retail Bank Deposit Pricing: An Intertemporal Asset Pricing Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 217-231, February.
- Van Hoose, David D., 1991. "Bank behavior, interest rate determination, and monetary policy in a financial system with an intraday federal funds market," Journal of Banking & Finance, Elsevier, vol. 15(2), pages 343-365, April.
- Dowd, Kevin, 1994. "Competitive Banking, Bankers' Clubs, and Bank Regulation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(2), pages 289-308, May.
- Brunner, Karl & Meltzer, Allan H., 1981. "Time deposits in the Brunner-Meltzer model of asset markets," Journal of Monetary Economics, Elsevier, vol. 7(1), pages 129-139.
- William Poole, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, Oxford University Press, vol. 84(2), pages 197-216.
- David B. Humphrey, 1990. "Why do estimates of bank scale economies differ?," Economic Review, Federal Reserve Bank of Richmond, issue Sep, pages 38-50.
- Elyasiani, Elyas & Kopecky, Kenneth J & VanHoose, David, 1995. "Costs of Adjustment, Portfolio Separation, and the Dynamic Behavior of Bank Loans and Deposits," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 955-974, November.
- Giannini, Curzio, 1995. "Money, trust, and central banking," Journal of Economics and Business, Elsevier, vol. 47(2), pages 217-237, May.
- Baltensperger, Ernst, 1980. "Alternative approaches to the theory of the banking firm," Journal of Monetary Economics, Elsevier, vol. 6(1), pages 1-37, January.
- Santomero, Anthony M & Siegel, Jeremy J, 1982. " A General Equilibrium Money and Banking Paradigm," Journal of Finance, American Finance Association, vol. 37(2), pages 357-369, May.
- Saving, Thomas R., 1977. "A theory of the money supply with competitive banking," Journal of Monetary Economics, Elsevier, vol. 3(3), pages 289-303, July. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:kap:atlecj:v:25:y:1997:i:4:p:331-343. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.