TY  - JOUR
AU  - Stiglitz,Joseph E.
AU  - Greenwald,Bruce
TI  - Towards a Reformulation of Monetary Theory:  Competitive Banking
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4117
PY  - 1992
Y2  - July 1992
UR  - http://www.nber.org/papers/w4117
L1  - http://www.nber.org/papers/w4117.pdf
N1  - Author contact info:
Joseph E. Stiglitz
Uris Hall, Columbia University
3022 Broadway, Room 814
New York, NY  10027
Tel: 212/854-0671
Fax: 212/662-8474
E-Mail: jes322@columbia.edu
AB  - 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.
ER  -