The Macroeconomic Effects on Interest on Reserves

Peter Ireland

No 772, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: This paper uses a New Keynesian model with banks and deposits, calibrated to match the US economy, to study the macroeconomic effects of policies that pay interest on reserves. While their effects on output and inflation are small, these policies require important adjustments in the way that the monetary authority manages the supply of reserves, as liquidity effects vanish and households' portfolio shifts increase banks' demand for reserves when short-term interest rates rise. Money and monetary policy remain linked in the long run, however, since policy actions that change the price level must change the supply of reserves proportionately.

Keywords: banking; reserves; interest; central banking (search for similar items in EconPapers)
JEL-codes: E31 E32 E51 E52 E58 (search for similar items in EconPapers)
Date: 2011-02-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cis, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://fmwww.bc.edu/EC-P/wp772.pdf main text (application/pdf)

Related works:
Journal Article: THE MACROECONOMIC EFFECTS OF INTEREST ON RESERVES (2014)
Working Paper: The Macroeconomic Effects of Interest on Reserves (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:772

Access Statistics for this paper

More papers in Boston College Working Papers in Economics from Boston College Department of Economics Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F Baum ().