Reserve Demand Estimation with Minimal Theory

Ricardo Lagos and Gaston Navarro

No 34972, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We propose a new reserve-demand estimation strategy---a middle ground between atheoretical reduced-form econometric approaches and fully structural quantitative-theoretic approaches. The strategy consists of an econometric specification that satisfies core restrictions implied by theory and controls for changes in administered-rate spreads that induce rotations and shifts in reserve demand. The resulting approach is as user-friendly as existing reduced-form econometric methods but improves upon them by incorporating a minimal set of theoretical restrictions that any reserve demand must satisfy. We apply this approach to U.S. data and obtain reserve-demand estimates that are broadly consistent with the structural estimates.

JEL-codes: E4 E41 E5 E50 (search for similar items in EconPapers)
Date: 2026-03
New Economics Papers: this item is included in nep-mon
Note: ME
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Working Paper: Reserve Demand Estimation with Minimal Theory (2026)
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