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Monetary Policy and Financial Intermediation

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  • Fuerst, Timothy S

Abstract

This paper develops a general equilibrium model of monetary nonneutrality that is a natural result of three basic assumptions: (1) financial intermediaries face reserve requirements on deposits, (2) financial intermediaries are the conduit for central bank monetary injections, and (3) monetary injections are not initially subject to reserve requirements. This asymmetry on the imposition of reserve requirements. This results in stochastic monetary injections being expansionary. The model also gives rise to an endogenous money multiplier because some purchases are made with cash while others with checking accounts, and the cash versus check composition of total purchases varies with the aggregate shocks. Copyright 1994 by Ohio State University Press.

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  • Fuerst, Timothy S, 1994. "Monetary Policy and Financial Intermediation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(3), pages 362-376, August.
    • Handle: RePEc:mcb:jmoncb:v:26:y:1994:i:3:p:362-76
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    Cited by:

    1. Riccardo Bonci & Francesco Columba, 2007. "The Effects Of Monetary Policy Shocks On Flow Of Funds:The Italian Case," Money Macro and Finance (MMF) Research Group Conference 2006 75, Money Macro and Finance Research Group.
    2. Max Gillman & Mark N Harris & Michal Kejak, 2007. "The Interaction of Inflation and Financial Development with Endogenous Growth," Money Macro and Finance (MMF) Research Group Conference 2006 29, Money Macro and Finance Research Group.
    3. Ramon Caminal, 2002. "Taxation of banks: A theoretical framework," UFAE and IAE Working Papers 525.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).

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