Central-bank interventions reduce bank failure and improve society's welfare.
The article explores how banks create and manage money, and how central-bank regulations can prevent bank failures. Banks issue money based on reserves and face the risk of not having enough cash on hand if too many people try to withdraw money at once. The study shows that when banks don't make enough profit, they can fail. By injecting more money or paying interest on reserves, central banks can help banks make more money and reduce the risk of failure.