Banking Panics and Deflation in Dynamic General Equilibrium

by Federal Reserve Board

This paper develops a framework to study the interaction between banking, price dynamics, and monetary policy. Deposit contracts are written in nominal terms: if prices unexpectedly fall, the real value of banks existing obligations increases. Banks default, panics precipitate, economic activity declines. If banks default, aggregate demand for cash increases because financial intermediation provided by banks disappears. When money supply is unchanged,...

• Format: Paperback
• Language: English
• ISBN: 1511660481
• ISBN13: 9781511660488
• Release Date: April 2015
• Publisher: Createspace Independent Publishing Platform
• Length: 42 Pages
• Weight: 0.27 lbs.
• Dimensions: 0.1" x 8.5" x 11.0"