Liquid Asset Ratios and Financial Sector Reform

Anne Gulde

No 1997/144, IMF Working Papers from International Monetary Fund

Abstract: As a monetary, selective credit, and government debt-management instrument, a liquid asset ratio is generally inefficient and may introduce serious distortions. However, it may play a limited role as a prudential instrument, particularly in less sophisticated banking systems or in the context of currency board arrangements. Recent trends in the use of this instrument have been to either abolish it altogether or to design it so as to minimize distortions. When necessary, these changes have been part of a broader effort to make financial intermediation more efficient by relying more on markets and less on regulations.

Keywords: WP; liquid asset requirement; central bank; private sector; requirement design; cash reserves; credit instrument; debt management; monetary policy; Banks; Banking Regulation; Central Bank Policy; bank liquidity; government debt strategy; liquid asset requirements; contractionary monetary policy; monetary management; bank reserves; excess reserves; treasury certificate; Government securities; Securities; Commercial banks; Liquidity management; Government debt management; Baltics; Global (search for similar items in EconPapers)
Pages: 62
Date: 1997-10-01
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