the financing of the illiquid loans to businesses and consumers that are the comparative advantage of banks and their link … to real activity. The constraint works because banks do not use traded liquid assets and liabilities with no reserve … alternative model in which profit-maximizing banks vary traded assets and liabilities with and without reserve requirements to …

Since the publication of Keynes' "General Theory of Employment, Interest, and Money" in 1936 many new ideas and … where banks endogenously enter and leave the market. The resulting model generates significant amplification and persistence …