Unanswered Quibbles with Fractional Reserve Free Banking

MPRA Paper from University Library of Munich, Germany

Abstract: We reassess monetary equilibrium theory by focusing on its foundation – price stickiness – and answer several ancillary questions. Prices are sticky at times. Contra monetary equilibrium theorists, this is not a reason to advocate an issuance of fiduciary media to counteract the effects of a sluggish price adjustment process. Issuances of fiduciary media will breed negative effects, primarily via wealth redistributions, faulty interest rate signals and exacerbated business cycles. Allowing the price level to adjust to maintain monetary equilibrium provides for fewer detrimental effects than adjusting the supply of credit.

Keywords: rigidities; sticky prices; monetary equilibrium theory; free banking; 100 percent reserve banking (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (9)

Published in Libertarian Papers 3.18(2011): pp. 1-24

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:79594

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