Monetary Policy Implementation with an Ample Supply of Reserves

Kyungmin Kim, Antoine Martin, Gara Afonso, Ed Nosal, Simon Potter and Sam Schulhofer-Wohl
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Kyungmin Kim: https://www.federalreserve.gov/econres/kyungmin-kim.htm

No 2020-020, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Methods of monetary policy implementation continue to change. The level of reserve supply---scarce, abundant, or somewhere in between---has implications for the efficiency and effectiveness of an implementation regime. The money market events of September 2019 highlight the need for an analytical framework to better understand implementation regimes. We discuss major issues relevant to the choice of an implementation regime, using a parsimonious framework and drawing from the experience in the United States since the 2007-09 financial crisis. We find that the optimal level of reserve supply likely lies somewhere between scarce and abundant reserves, thus highlighting the benefits of implementation with what could be called "ample" reserves. The Federal Reserve's announcement in October 2019 that it would maintain a level of reserve supply greater than the one that prevailed in early September is consistent with the implications of our framework.

Keywords: Federal funds market; Monetary policy implementation; Ample reserve supply (search for similar items in EconPapers)
JEL-codes: E42 E58 (search for similar items in EconPapers)
Pages: 57 p.
Date: 2020-02-25
New Economics Papers: this item is included in nep-gen, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Monetary Policy Implementation with an Ample Supply of Reserves (2020)
Working Paper: Monetary Policy Implementation With an Ample Supply of Reserves (2020)
Working Paper: Monetary policy implementation with an ample supply of reserves (2020)
Working Paper: Monetary Policy Implementation with an Ample Supply of Reserves (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2020-20

DOI: 10.17016/FEDS.2020.020

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