Towards a Reformulation of Monetary Theory : Competitive Banking

Joseph E. Stiglitz, Bruce Greenwald

This paper, after providing a critique of standard monetary theory based on the transactions demand for money, examines the effect of monetary policy (changes in reserve requires and open market operations) in a model with competitive, risk averse banks. The effects of changes in bank net worth and bank's risk perceptions are also analyzed. In deep recessions, monetary policy may be ineffective because banks are unwilling to lend. The effects of monetary policy are, at most, only partially mediated through changes in the interest rate. The implications for traditional IS-LM analysis are briefly noted

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Year of publication:	July 1992
Authors:	Stiglitz, Joseph E.
Other Persons:	Greenwald, Bruce (contributor)
Institutions:	National Bureau of Economic Research (contributor)
Publisher:	Cambridge, Mass : National Bureau of Economic Research
Subject:	Geldtheorie \| Monetary theory \| Bank \| Geldpolitik \| Monetary policy \| Kredittheorie \| Theory of credit

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