Raising Interest Rates: IOER vs. OMO: Interest on Excess Reserves vs Open Market Operations

William H. Carlson and Conway L. Lackman

International Journal of Financial Research, 2018, vol. 9, issue 1, 142-146

Abstract: We demonstrate that IOER should make the excess reserves even larger, continuing the problem of monetary policy control and rewarding the banks for their policy errors fostering the Great Recession by giving them risk free returns on the $2.5 trillion of idle funds that are benefiting no one except the banks themselves, or having the banks invest those idle funds in some useful manner such as helping finance the government deficit and fix our roads and bridges. The number 1 priority should be to get rid of the troublesome excess reserves and utilizing open market operations (OMO).

Keywords: monetary policy; banking policy (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:jfr:ijfr11:v:9:y:2018:i:1:p:142-146

DOI: 10.5430/ijfr.v9n1p142

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