costs, banks are redundant. A central bank policy of paying interest on bank reserves can reverse inflation's distortionary …

, where banks make loans repayable in goods and depositors hold claims on the bank payable on demand in goods. Aggregate … production may be delayed in the economy. If so, we show that the level of ongoing bank lending, and hence of aggregate future … reduction of total output. A number of inefficiencies including bank failures can result if deposits turn out to be too high. We …

perfectly controlled by the bank. Demand deposit accounts commit the bank to allow holders to withdraw or deposit funds at will …. The resultant uncertainty in deposit flows exposes the bank to the risk of violating regulatory restrictions on leverage …. Deposits create value for the bank except when it is close to hitting the leverage restrictions, because sudden deposit inflows …