Financial Management White Papers

Resolving the Puzzle of the Under issuance of National Bank Notes

Overview This paper focuses on the puzzle of under issuance of national bank notes, which disappears when one disaggregates data, takes account of regulatory limits, and considers differences in opportunity costs. Banks with poor lending opportunities maximized their issuance. Other banks chose to limit issuance. Redemption costs do not explain cross-sectional variation in issuance and the observed relationship between note issuance and excess reserves is inconsistent with the redemption risk hypothesis of under issuance.

Further White Paper Details
PublisherNational Bureau Of Economic Research File FormatPDF, requires Acrobat Rdr 5
Date PublishedDecember 2004 Downloads4
FormatWhite Papers   
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