Journal of Political Economy Vol. 107 No. 5 1999
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.
- DOI
- 10.1086/250085
- Volume
- 107
- Issue
- 5
- Pages
- 929-945
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib