Working Papers

  • Money Creation and Banking: Theory and Evidence (Job Market Paper)
    (1) Draft (2) Slides

    This paper develops a monetary-search model where the money multiplier is endogenously determined. I show that when the central bank pays enough interest on reserves, the money multiplier depends on the nominal interest rate and the interest on reserves rather than the reserve requirement. The calibrated model can explain the evolution of the money multiplier and the excess reserve-deposit ratio in the pre-2008 and post-2008 era. Moreover, I find that the dramatic changes in the money multiplier after 2008 are driven by the introduction of the interest on reserves with the low nominal interest rate.

  • On the Instability of Fractional Reserve Banking
    (1) Draft (2) Slides

    This paper develops a dynamic general equilibrium model to study the (in)stability of the fractional reserve banking system. The model shows that the fractional reserve banking system can endanger stability in the sense that equilibrium is more prone to exhibit endogenous cyclic, chaotic, and stochastic dynamics under lower reserve requirements, although it can increase welfare in the steady state. Introducing endogenous unsecured credit to the baseline model does not change the main results. I also provide empirical evidence that is consistent with the prediction of the model.

Work in Progress

  • Implementing Monetary Policy: the Role of Repo and Federal Funds Markets
  • Yield Curve Control: A Search-Theoretic Approach
  • Joint Fiscal and Monetary Policy without Commitment
    (with Saroj Dhital)

Conference Discussions

  • Central Bank Digital Currency, Credit Supply, and Financial Stability
    by Young Sik Kim and Ohik Kwon
    Paper, Discussion at the KIEA Annual Meeting, December 2019.
  • The Effects of Sector-Specific Credit Supply Shocks on the U.S. Economy
    by Maximillian Littlejohn
    Paper, Discussion at the MVEA Annual Meeting, October 2020.

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