02107cas a2200253 a 4500 AALejournalIMF012090 230101c9999 xx r poo 0 0eng d 5.00 USD 9781475505528 1018-5941 BD-DhAAL BD-DhAAL Kumhof, Michael. The Chicago Plan Revisited / Michael Kumhof, Jaromir Benes. Washington, D.C. : International Monetary Fund, 2012. 1 online resource (71 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this plan: (1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money. (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt. (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation. We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher's claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy. Mode of access: Internet Benes, Jaromir. IMF Working Papers; Working Paper ; No. 2012/202 Full text available on IMF http://elibrary.imf.org/view/journals/001/2012/202/001.2012.issue-202-en.xml IMF e-Library