A partial two sector banking model with interest on reserves

Shawn Osell

International Journal of Monetary Economics and Finance, 2019, vol. 12, issue 4, 309-324

Abstract: This paper develops a two-sector theoretical partial equilibrium model with interest on reserves (IOR) in the banking sector. It also constructs standard vector autoregression models with empirical data including IOR. The objective of this paper is to analyse the monetary policy transmission effects of the Federal Reserve's interest on reserve policy. Impulse response functions are applied to both the theoretical and empirical models. The estimated impulse response functions are then compared to the theoretical models impulse response functions in order to see how well the model fits the data. This paper's model finds that the interest on reserve tool and open market operations (OMO) have the same effect on the macroeconomy.

Keywords: monetary policy; IOR; interest on reserves; quantitative easing; vector autoregression. (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijmefi:v:12:y:2019:i:4:p:309-324

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