Reserve Requirements Survey

Andrew Metrick
Authors registered in the RePEc Author Service: June Rhee

Journal of Financial Crises, 2022, vol. 4, issue 4, 133-149

Abstract: Banks have a private motive to hold some level of cash and liquid reserves, but the negative externalities of bank runs create a public interest in setting a regulatory level higher than the privately optimal level. We can think of such reserve requirements (RRs) as the original form of liquidity regulation. In this paper, we focus on 14 cases in which central banks adjusted RRs after crises hit, typically to deal with liquidity shortages in the banking system. We observe that RR adjustments have several advantages in a crisis: (1) such changes require little process, and the change for banks can be quick; (2) stigma concerns may be much lower than with emergency lending operations; (3) RRs can be used to fine-tune incentives for holding various types and maturities of assets; and (4) RR easing can complement a central bank's other liquidity support programs.

Keywords: financial crisis intervention; liquidity; liquidity regulation; reserve requirement (search for similar items in EconPapers)
JEL-codes: G01 G28 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
https://elischolar.library.yale.edu/cgi/viewconten ... -of-financial-crises (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ysm:ypfsfc:v:4:y:2022:i:4:p:133-149

Access Statistics for this article

More articles in Journal of Financial Crises from Yale Program on Financial Stability (YPFS) Contact information at EDIRC.
Bibliographic data for series maintained by ().