This paper analyzes the equilibrium growth paths of two economies that are identical in all respects, except for the organization of their financial systems: in particular, one has a competitive banking system and the other has a monopolistic banking system. In addition, the sources of...

Paying interest on required reserves is considered in an overlapping generations model in which the return to capital dominates the return to fiat money. As Smith (1991) showed, financing interest on reserves benefits the initial old at the expense of future generations. We show that the...