The demand for and supply of deposits by credit unions: The Caisses Populaires' case reply and comments

Smith points out rightly that the symbol R refers to two different, though each time well defined, concepts in Chateau's (1980) article in this Journal. His claim, however, that this leads to a misspecification of the theoretical model is erroneous, and is refuted. Further it is shown explicitly under which conditions the maximization of expected utility of reserves is consistent with balance-sheet growth. For the Caisses' system acting within the Quebec institutional and regulatory environment, the growth-cum-managerial-discretion model is theoretically appealing, as well as supported by the available empirical evidence.