Bank reserves in the United States increased dramatically at the end of 2008. Subsequent asset purchase programs in 2009 and 2011 more than doubled the quantity of reserves outstanding. These events required major adjustments in banks' balance sheets. We study the evolution of reserve holdings...

This discussion was prepared for the 84th Meeting of the Carnegie-Rochester-NYU Conference Series on Public Policy "Monetary Policy: An Unprecedented Predicament" held on November 14-15, 2014, at Carnegie Mellon University.

I study a non-stochastic, perfect foresight, general equilibrium model with a banking system that may hold large excess reserves when the central bank pays interest on reserves. The banking system also faces a capital constraint that may or may not be binding. When the rate of interest on...

It is often the case that banks in the US are willing to borrow in the fed funds market (the interbank market for funds) at higher rates than the ones they could obtain by borrowing at the Fed's discount window. This phenomenon is commonly explained as the consequence of the existence of a...

We examine how the possibility of a bank run affects the deposit contract offered and the investment decisions made by a competitive bank. Cooper and Ross (1998) have shown that when the probability of a run is small, the bank will offer a contract that admits a bank-run equilibrium. We show...

We construct an endogenous growth model in which bank runs occur with positive probability in equilibrium. In this setting, a bank run has a permanent effect on the levels of the capital stock and of output. In addition, the possibility of a run changes the portfolio choices of depositors and of...

Governments typically respond to a run on the banking system by temporarily freezing deposits and by rescheduling payments to depositors. Depositors may even be required to demonstrate an urgent need for funds before being allowed to withdraw. We study ex post efficient policy responses to a...

In this note I review evidence suggesting that shortages of small change occurred in the territory of Argentina during the end of the eighteenth and the beginning of the nineteenth centuries. For the colonial period (until 1810) the main pieces of evidence are: (i) the widespread use of informal...

We study optimal government policy in an economy where (i) search frictions create a coordination problem and generate multiple Pareto-ranked equilibria and (ii). The government finances the provision of a public good by taxing trade. The government must choose the tax rate before it knows which...