A note on US excess bank reserves and the credit contraction

Tarron Khemraj

MPRA Paper from University Library of Munich, Germany

Abstract: This paper reports aggregate bank excess liquidity preference curves for the pre-crisis and crisis periods. It is argued that the flat curve reflects a threshold lending rate at which point banks accumulate reserves passively. Moreover, the expansion of reserves – when the lending rate threshold is binding – does not lead to credit expansion. The latter would require policies that directly increase the demand for loans, particularly by the business sector.

Keywords: bank reserves; minimum loan interest rate; credit crunch (search for similar items in EconPapers)
JEL-codes: E40 E41 G21 (search for similar items in EconPapers)
Date: 2009-10
New Economics Papers: this item is included in nep-ban, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:18702

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