  This paper studies the role of banks' money creation in monetary
transmission. I develop a monetary-search model where demand for the monetary
base and the money multiplier are endogenously determined through banks' money
creation. The model and data show that reserves are not independent of interest
rate policy, even with ample reserves. Furthermore, short-term rates and
interest on reserves play distinct roles in monetary transmission. I evaluate
the theory by matching it with data, and the calibrated model can account for
the evolution of reserves, excess reserves, and the money multiplier
