The Effect of Changes in Reserve Requirements on Investment and GNP

Prakash Loungani and Mark Rush

Journal of Money, Credit and Banking, 1995, vol. 27, issue 2, 511-26

Abstract: The authors investigate the impact of 'credit shocks' on real activity by using changes in reserve requirements to measure shocks to financial intermediation. Reserve requirement changes are often made for bank regulatory reasons and, hence, are far more exogenous with respect to macroeconomic developments than the credit variables used in earlier tests. The authors present reduced-form evidence that, even after controlling for the link between monetary aggregates and real activity, an increase in reserve requirements lowers aggregate investment, real GNP, and commercial and industrial lending by banks. Copyright 1995 by Ohio State University Press.

Date: 1995
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Related works:
Working Paper: The effect of changes in reserve requirements on investment and GNP (1994)
Working Paper: The effect of changes in reserve requirements on investment and GNP (1991)
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:27:y:1995:i:2:p:511-26

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