Interest on Reserves: Implications for Banking and Policymaking

David VanHoose

No 2008-PB-05, NFI Policy Briefs from Indiana State University, Scott College of Business, Networks Financial Institute

Abstract: This policy brief evaluates the banking and policy implications of 2006 Congressional legislation authorizing the Federal Reserve to pay interest on reserves held at Federal Reserve banks beginning in October 2011. This upcoming policy change has received remarkably little attention from the financial media, yet it promises to have effects along several dimensions. Likely to be impacted are total reserves held by depository institutions, the interest sensitivities of these institutions’ asset holdings, balances in sweep accounts managed by depository institutions, and depository institutions intraday overdrafts of their reserve accounts at Federal Reserve banks. In addition, the authorization to pay interest on reserves broadens the set of tools of monetary policy available to the Fed. Finally, this policy change strengthens the case for significant reductions in, or possibly elimination of, reserve requirements on U.S. depository institutions.

Keywords: Interest on reserves; intraday overdrafts; sweep accounts (search for similar items in EconPapers)
JEL-codes: E51 G28 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2008-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.indstate.edu/business/sites/business.in ... 8-PB-05_VanHoose.pdf Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.indstate.edu/business/sites/business.indstate.edu/files/Docs/2008-PB-05_VanHoose.pdf [301 Moved Permanently]--> https://indianastate.edu/business/sites/business.indstate.edu/files/Docs/2008-PB-05_VanHoose.pdf)

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:nfi:nfipbs:2008-pb-05

Access Statistics for this paper

More papers in NFI Policy Briefs from Indiana State University, Scott College of Business, Networks Financial Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ray Thomas ().