How Abundant Are Reserves? Evidence from the Wholesale Payment System

Gara Afonso, Darrell Duffie, Lorenzo Rigon () and Hyun Song Shin

No 1040, Staff Reports from Federal Reserve Bank of New York

Abstract: Before the era of large central bank balance sheets, banks relied on incoming payments to fund outgoing payments in order to conserve scarce liquidity. Even in the era of large central bank balance sheets, rather than funding payments with abundant reserve balances, we show that outgoing payments remain highly sensitive to incoming payments. By providing a window on liquidity constraints revealed by payment behavior, our results shed light on thresholds for the adequacy of reserve balances. Our findings are timely, given the ongoing shrinking of central bank balance sheets around the world in response to inflation.

Keywords: real-time gross settlement; quantitative tightening; Balance sheet management; reserve balances (search for similar items in EconPapers)
JEL-codes: E42 E44 E52 E58 G21 (search for similar items in EconPapers)
Pages: 26
Date: 2022-11-01
New Economics Papers: this item is included in nep-ban, nep-mon and nep-pay
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: How abundant are reserves? Evidence from the wholesale payment system (2022)
Working Paper: How Abundant Are Reserves? Evidence from the Wholesale Payment System (2022)
Working Paper: How Abundant Are Reserves? Evidence from the Wholesale Payment System (2022)
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