Retail deposit sweep programs: issues for measurement, modeling and analysis

Richard Anderson ()

No 2003-026, Working Papers from Federal Reserve Bank of St. Louis

Abstract: Since January 1994, many banks in the United States have initiated retail-deposit sweep programs which reduce statutory reserve requirements by re-labeling transaction deposits as money market deposit accounts. As a result, approximately half of aggregate transaction deposits are now excluded from M1. This re-labeling is invisible to customers and, hence, cannot affect their demand for transaction balances. Nevertheless, a recent article in this Journal explored the effect of this invisible re-labeling on M1 demand. This note emphasizes that those results are spurious, and offers additional examples of measurement distortions due to retail deposit sweep activity.

Keywords: Bank reserves; Money supply (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-fin
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Citations: View citations in EconPapers (9)

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DOI: 10.20955/wp.2003.026

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