With Abundant Reserves, Do Banks Adjust Reserve Balances to Accommodate Payment Flows?

Catherine Huang, Adam Copeland and Kailey Kraft

No 20221012, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: As a result of the global financial crisis (GFC), the Federal Reserve switched from a regime of scarce reserves to one of abundant reserves. In this post, we explore how banks’ day-to-day management of reserve balances with respect to payment flows changed with this regime switch. We find that bank behavior did not change on average; under both regimes, banks increased their opening balances when they expected higher outgoing payments and, similarly, decreased these balances with expected higher incoming payments. There are substantial differences across banks, however. At the introduction of the abundant-reserves regime, small domestic banks no longer adjusted balances alongside changes in outgoing payments.

Keywords: quantitative easing (QE); liquidity; reserves; payments; Federal Reserve; banks (search for similar items in EconPapers)
JEL-codes: E52 (search for similar items in EconPapers)
Date: 2022-10-12
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mon
References: Add references at CitEc
Citations:

Downloads: (external link)
https://libertystreeteconomics.newyorkfed.org/2022 ... odate-payment-flows/ Full text (text/html)

Related works:
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:fip:fednls:94906

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Liberty Street Economics from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli ().