An implicit rationale for a bank reserve requirement is that a central monetary authority is in a unique position (as "social planner) to impose a "socially superior" outcome to that yielded by a free banking system. We illustrate how this can be true in the context of a simple economy modeled...

One traditional argument in favor of bank reserve requirements holds that since a b ank and its depositors are asymmetrically informed as to the bank's reserve position and its portfolio, the bank will hold too few reserves and too risky a port folio. This being the case, presumably a central...

This paper investigates a model of military conflict between two regimes in which each may initiate combat in order to confiscate resources from the other. Conflict, or the potential for same, results in wasteful military spending which lowers growth for each regime. Equilibrium military...

The authors consider a neoclassical growth model with risky investment projects in which a borrower's (an investor's) risk type is private information. Their innovation is to determine jointly the equilibrium loan contract and the economy's growth path and the steady state capital stock. The...

Limited participation models explain a short-run liquidity effect as arising from the redistribution of income from non-participants in the bond market to participants in the bond market. However, these models also imply that the liquidity effect is smaller the larger is long-run money growth....