Creating a system-wide asset-based reserve system

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Chapter 26 in All Fall Down, 2018, pp 171-175 from Edward Elgar Publishing

Abstract: Creating an asset-based reserve system would require changes in the way the Fed conducts monetary policy and in the structure of its balance sheet as well as the balance sheets of private financial firms. As it does now in transactions with dealers in government securities, the Fed purchases assets from (and subsequently returns them to) the asset side of private financial firms’ balance sheets. Tables in this chapter show these changes for the Fed as a shift of bank reserves from the liability to the asset side of its balance sheet and a shift in repurchase agreements and financial sector discounts to the liability side of its balance sheet. The central bank would earn interest on the repos it holds and the collateral it holds for discounts in exchange for the interest-free liabilities it creates for private institutions.

Keywords: Economics and Finance; Politics and Public Policy (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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