Federal Reserve Balance-Sheet Policy in an Ample Reserves Framework: An Inventory Approach

Joseph Haubrich

No 23-25, Working Papers from Federal Reserve Bank of Cleveland

Abstract: I apply techniques from stochastic inventory theory to calibrate the optimal balance-sheet buffer needed to implement monetary policy in an ample reserves regime. I quantify the size of the buffer to be about $60 billion. This is small relative to the reserves needed for an ample reserves regime, even though the FOMC appears to act as if the cost of too few reserves is over 20 times as high as the cost of too many.

Keywords: reserves; monetary policy (search for similar items in EconPapers)
JEL-codes: D25 E58 (search for similar items in EconPapers)
Pages: 24
Date: 2023-11-08
New Economics Papers: this item is included in nep-acc, nep-cba and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwq:97254

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DOI: 10.26509/frbc-wp-202325

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