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Some statistical aspects of precautionary reserves in banking

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  • Ben O’Neill

Abstract

We examine the volatility of overall withdrawal demands in banking using a model allowing for correlation between individual withdrawal demands. We derive various volatility and elasticity results which show the effects of correlated withdrawals in setting precautionary reserves. We discuss the implications of this analysis for fractional reserve banking. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Ben O’Neill, 2015. "Some statistical aspects of precautionary reserves in banking," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 28(2), pages 179-193, June.
    • Handle: RePEc:kap:revaec:v:28:y:2015:i:2:p:179-193
    DOI: 10.1007/s11138-014-0264-x
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    References listed on IDEAS

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    1. Selgin, George, 1994. "Free Banking and Monetary Control," Economic Journal, Royal Economic Society, vol. 104(427), pages 1449-1459, November.
    2. David E.W. Laidler, 2016. "The Golden Age of the Quantity Theory," Economics Books, Princeton University Press, edition 1, number 4959.
    3. Olivera, Julio H G, 1971. "The Square-Root Law of Precautionary Reserves," Journal of Political Economy, University of Chicago Press, vol. 79(5), pages 1095-1104, Sept.-Oct.
    4. Baltensperger, Ernst, 1974. "The Precautionary Demand for Reserves," American Economic Review, American Economic Association, vol. 64(1), pages 205-210, March.
    5. Baltensperger, Ernst, 1980. "Alternative approaches to the theory of the banking firm," Journal of Monetary Economics, Elsevier, vol. 6(1), pages 1-37, January.
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    More about this item

    Keywords

    Fractional reserve banking; Precautionary reserves; G01; G21;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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