Discussion Paper
Private money and reserve management in a random-matching model
Abstract: In this paper, we develop a model of money and reserve-holding banks. We allow for private liabilities to circulate as media of exchange in a random-matching framework. Some individuals, which we identify as banks, are endowed with a technology to issue private notes and to keep reserves with a clearinghouse. Bank liabilities are redeemed according to a stochastic process that depends on the endogenous trades. We find conditions under which note redemptions act as a force that is sufficient to stabilize note issue by the banking sector.
Keywords: Banks and banking; Bank notes; Intermediation (Finance);
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Bibliographic Information
Provider: Federal Reserve Bank of Minneapolis
Part of Series: Discussion Paper / Institute for Empirical Macroeconomics
Publication Date: 1999
Number: 128