Macroeconomic stability in a free banking system.: An article from: Atlantic Economic Journal

This digital document is an article from Atlantic Economic Journal, published by Atlantic Economic Society on December 1, 1997. The length of the article is 6440 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.

From the author: This paper uses a simple general equilibrium banking model to examine how permitting banks to issue notes might affect macroeconomic stability. Adding banknotes to the menu of available liabilities alters the interest sensitivities of bank security and deposit choices. This changes the slope of the economy's LM schedule and the magnitude of its displacement in the face of financial market disturbances. However, the theoretical directions of these changes that free banking would induce are ambiguous. While empirical evidence permits some speculation that free banking actually could reduce stability in the face of expenditure (IS) shocks, the key point of this paper is that any theoretical case favoring free banking cannot rest on an argument that free banking unambiguously would stabilize equilibrium nominal income.

Citation Details
Title: Macroeconomic stability in a free banking system.
Author: David D. Vanhoose
Publication:Atlantic Economic Journal (Refereed)
Date: December 1, 1997
Publisher: Atlantic Economic Society
Volume: v25 Issue: n4 Page: p331(13)

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