A public finance analysis of multiple reserve requirements

Marco Espinosa-Vega () and Steven Russell

No 98-1, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: This paper analyzes multiple reserve requirements of the type that have been imposed by a number of developing countries. We show that previous theoretical work on this topic has not succeeded in providing a social welfare rationale for the existence of multiple reserve requirements: in the basic reserve requirements model, any allocation that can be supported by a multiple-reserves regime can also be supported by a single-bond reserve requirement. We go on to present extended versions of the model in which it is possible for a multiple-reserves regime to improve social welfare relative to any single-reserve (currency or bond) and/or deposit-tax regime. We demonstrate the empirical plausibility of our approach by providing a case study of Mexico, a country with extensive historical experience with multiple reserve requirements

Keywords: Developing countries; Finance, Public (search for similar items in EconPapers)
Date: 1998
New Economics Papers: this item is included in nep-env, nep-mon, nep-pbe and nep-pub
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Citations: View citations in EconPapers (1)

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Working Paper: A public finance analysis of multiple reserve requirements (1999)
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