Working Paper

Are there optimal multiple reserve requirements?

Abstract: A number of developing countries have adopted deficit-finance regimes involving multiple reserve requirements. One question the previous literature on this phenomenon has not addressed is whether multiple-reserves regimes can improve on regimes involving single-currency-reserve requirements if the policy settings of the latter regimes are assumed to be chosen optimally. We find that a \"conventional\" multiple-reserves regime--a regime with positive nominal rates on reservable bonds--cannot Pareto-improve an optimal single-currency-regime but can, in some cases, increase social welfare over such a regime.

Keywords: Banks and banking, Central; Bank reserves;

Status: Published in Journal of Financial Intermediation, January 2001

Bibliographic Information

Provider: Federal Reserve Bank of Atlanta

Part of Series: FRB Atlanta Working Paper

Publication Date: 1996

Number: 96-18