EconPapers    
Economics at your fingertips  
 

A note on reserve requirements and banks' liquidity

Joseph Bitar

Post-Print from HAL

Abstract: Unlike past literature adopting the loanable funds view, we follow the financing model of bank intermediation in order to analyse the monetary mechanisms relating to reserve requirements and compute banks' margins on their lending and deposit activities. We show that, when remunerated at a rate below the money market interest rate, reserve requirements increase the spread between bank loans and deposits interest rates, without any impact on the level of interest rates. We review and analyse the uses of reserve requirements as a prudential tool and as a monetary policy instrument. We also analyse their use for capital flows management and for de‐dollarization in emerging economies. We argue that reserve requirements are a sub‐optimal and outdated policy tool, and we suggest imposing direct taxes on banks' deposits and loans interest payments, as a more efficient alternative to reserve requirements.

Date: 2020-12-28
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-03140035
References: Add references at CitEc
Citations: Track citations by RSS feed

Published in International Journal of Finance and Economics, Wiley, 2020, ⟨10.1002/ijfe.2403⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:hal:journl:hal-03140035

DOI: 10.1002/ijfe.2403

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().

 
Page updated 2022-01-26
Handle: RePEc:hal:journl:hal-03140035