Banks lend and then try to find reserves, after the fact, because they have legal requirements. No bank loss a good lending business because they have not reserves enough.
When a bank make a loan, there are two possibilities: they have enough reserves, then they don't need to do anything.
Or they don't have enough reserves, so they have to borrow them from other banks or from the central bank.
If they borrow them from other banks they are creating demand for reserves in the inter-bank market. That makes the interest rate go up.
The central banks don't try to control the quantity of money, but the interest rate. If there are a lot of demand for reserves and the Central Bank don't add reserves to the system the interest rate will go up. So, the Central Bank add or retire reserves in order to keep the interest rate in the range they want.
The quantity of money is decided by the demand of lending in the economy.
The Central Bank can choose to try to control the quantity of money or the interest rate, but not both. All modern Central Banks try to control the interest rate.
Banks lend and then try to find reserves, after the fact, because they have legal requirements. No bank loss a good lending business because they have not reserves enough.
When a bank make a loan, there are two possibilities: they have enough reserves, then they don't need to do anything.
Or they don't have enough reserves, so they have to borrow them from other banks or from the central bank.
If they borrow them from other banks they are creating demand for reserves in the inter-bank market. That makes the interest rate go up.
The central banks don't try to control the quantity of money, but the interest rate. If there are a lot of demand for reserves and the Central Bank don't add reserves to the system the interest rate will go up. So, the Central Bank add or retire reserves in order to keep the interest rate in the range they want.
The quantity of money is decided by the demand of lending in the economy.
The Central Bank can choose to try to control the quantity of money or the interest rate, but not both. All modern Central Banks try to control the interest rate.