We review some inflationary and growth claims surrounding fiscal and monetary policy interactions. While financial intermediation has long been acknowledged as a key mechanism in the transmission of these interactions, only recently have economists incorporated the explicit modeling of such...

In this paper, we develop an endogenous growth model with financial intermediation to examine the effects of financial repression on growth, inflation, and welfare. By limiting the liquidity provision, binding reserve requirements always suppress economic growth while their effect on inflation...

A number of developing countries have adopted deficit-finance regimes involving multiple reserve requirements. One question the previous literature on this phenomenon has not addressed is whether multiple-reserves regimes can improve on regimes involving single-currency-reserve requirements if...

In this paper the authors study the stability properties of the alternative steady-state equilibria that arise in a neoclassical production model that delivers pleasant monetarist arithmetic. They show that if the government’s monetary policy rule involves a fixed money supply growth rate,...

This paper analyzes multiple reserve requirements of the type that have been imposed by a number of developing countries. We show that previous theoretical work on this topic has not succeeded in providing a social welfare rationale for the existence of multiple reserve requirements. We go on to...

This paper analyzes multiple reserve requirements of the type that have been imposed by a number of developing countries. We show that previous theoretical work on this topic has not succeeded in providing a social welfare rationale for the existence of multiple reserve requirements: in the...

Credit rationing is a common feature of most developing economies. In response to it, the governments of these countries often operate extensive credit programs and lend, either directly or indirectly, to the private sector. We analyze the macroeconomic consequences of a typical government...

In this paper we integrate Diamond's (1965) model of neoclassical production and capital with Wallace's (1984) model of monetary policy in order to study the real effects of two types of monetary policy actions: open market operations and changes in reserve requirements. We show that a permanent...

An important theoretical literature motivates collateral as a mechanism that mitigates adverse selection, credit rationing, and other inefficiencies that arise when borrowers hold ex ante private information. There is no clear empirical evidence regarding the central implication of this...

Until recently, the trend in world capital markets has been toward increasing globalization. Recent events in Latin America and Asia have caused many in policy-making circles to question whether this trend should be wholly, or at least partially, reversed. It is commonly argued that—at a...