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Open-market operations in a model of regulated, insured intermediaries

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  • John Bryant
  • Neil Wallace

Abstract

In ?The Inefficiency of Interest-Bearing National Debt,? (JPE, April 1979) we argued that private sector transaction costs are needed in order to explain interest on government debt. It follows that if the government?s transaction costs do not depend on its portfolio, then, barring special circumstances, an open-market purchase is deflationary and welfare improving. In this paper we show that this result can survive a potentially relevant special circumstance: reserve requirements which limit the size of insured intermediaries.

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  • John Bryant & Neil Wallace, 1978. "Open-market operations in a model of regulated, insured intermediaries," Staff Report 34, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmsr:34
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    References listed on IDEAS

    as
    1. Bryant, John & Wallace, Neil, 1979. "The Inefficiency of Interest-bearing National Debt," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 365-381, April.
    2. Kareken, John H & Wallace, Neil, 1978. "Deposit Insurance and Bank Regulation: A Partial-Equilibrium Exposition," The Journal of Business, University of Chicago Press, vol. 51(3), pages 413-438, July.
    3. Merton H. Miller & Daniel Orr, 1966. "A Model of the Demand for Money by Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(3), pages 413-435.
    4. Leonall C. Andersen & Jerry L. Jordan, 1968. "Monetary and fiscal actions: a test of their relative importance in economic stabilization," Review, Federal Reserve Bank of St. Louis, vol. 50(Nov), pages 11-23.
    5. George L. Perry, 1978. "Slowing the Wage-Price Spiral: The Macroeconomic View," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 9(2), pages 259-299.
    6. Stein, Jerome L, 1979. "Inside the Monetarist Black Box: Reply," American Economic Review, American Economic Association, vol. 69(5), pages 944-946, December.
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    Citations

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    Cited by:

    1. Stanley Fischer, 1980. "On Activist Monetary Policy with Rational Expectations," NBER Chapters, in: Rational Expectations and Economic Policy, pages 211-247, National Bureau of Economic Research, Inc.
    2. Joseph H. Haslag, 2000. "On Fed watching and central bank transparency in an overlapping generations model," Working Papers 0002, Federal Reserve Bank of Dallas.
    3. John Bryant, 1980. "The competitive provision of fiat money," Staff Report 48, Federal Reserve Bank of Minneapolis.
    4. Rangan Gupta & Lardo Stander, 2014. "Endogenous Fluctuations in an Endogenous Growth Model with Inflation Targeting," Working Papers 201432, University of Pretoria, Department of Economics.
    5. Antoine Martin, 2002. "Reconciling Bagehot with the Fed's response to Sept. 11," Research Working Paper RWP 02-10, Federal Reserve Bank of Kansas City.
    6. Bittencourt, Manoel & Gupta, Rangan & Stander, Lardo, 2014. "Tax evasion, financial development and inflation: Theory and empirical evidence," Journal of Banking & Finance, Elsevier, vol. 41(C), pages 194-208.
    7. Bryant, John, 1981. "Bank Collapse and Depression," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 13(4), pages 454-464, November.
    8. Bryant, John, 1980. "Shocks, learning, and persistence," Economics Letters, Elsevier, vol. 6(4), pages 315-320.
    9. Lawrence Sáez & Xianwen Shi, 2004. "Liquidity Pools, Risk Sharing, and Financial Contagion," Journal of Financial Services Research, Springer;Western Finance Association, vol. 25(1), pages 5-23, February.
    10. Joydeep Bhattacharya & Joseph H. Haslag, 1999. "Seigniorage in a neoclassical economy: some computational results," Working Papers 9901, Federal Reserve Bank of Dallas.
    11. Preston J. Miller & Arthur J. Rolnick, 1979. "The CBO's policy analysis: an unquestionable misuse of a questionable theory," Staff Report 49, Federal Reserve Bank of Minneapolis.
    12. Bittencourt, Manoel & Gupta, Rangan & Makena, Philton & Stander, Lardo, 2022. "Socio-political instability and growth dynamics," Economic Systems, Elsevier, vol. 46(4).
    13. repec:ipg:wpaper:2014-461 is not listed on IDEAS
    14. Gupta, Rangan & Stander, Lardo, 2018. "Endogenous fluctuations in an endogenous growth model: An analysis of inflation targeting as a policy," The Quarterly Review of Economics and Finance, Elsevier, vol. 69(C), pages 1-8.
    15. John Bryant, 1978. "Transactions demand for money," Staff Report 38, Federal Reserve Bank of Minneapolis.
    16. Joseph H. Haslag, 1994. "The effects of monetary policy in a model with reserve requirements," Working Papers 9415, Federal Reserve Bank of Dallas.
    17. Stanley Fischer, 1979. "On Activist Monetary Policy With Rational Expectations," NBER Working Papers 0341, National Bureau of Economic Research, Inc.

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