Journal Article
Measuring the policy effects of changes in reserve requirement ratios
Abstract: The monetary base is the sum of high-powered money and an adjustment factor that measures changes in reserve requirement ratios. This adjustment factor is calculated so that it responds to changes in deposit levels in addition to changes in reserve requirements. Consequently, researchers and policymakers using the monetary base are seeing a mixture of changes implemented through open market operations, discount window borrowings, and reserve requirements, together with nonpolicy actions acting on deposit flows. ; Joseph Haslag and Scott Hein calculate the reserve step index (RSI) to separate changes in one of the available adjustment factors-the St. Louis Federal Reserve Bank's Reserve Adjustment Measure (RAM)-into pure reserve-requirement effects and deposit-flow effects. RSI would give analysts a measure that responds only to changes in reserve requirement ratios. Haslag and Hein also provide statistical evidence suggesting that combining RSI and the deposit-flow effect, as RAM does, is not justifiable in simple reduced-form models of nominal GNP growth, output growth, or inflation.
Keywords: Bank reserves;
Access Documents
File(s):
File format is text/html
https://www.dallasfed.org/~/media/documents/research/er/1995/er9503a.pdf
Description: Full Text
Authors
Bibliographic Information
Provider: Federal Reserve Bank of Dallas
Part of Series: Economic and Financial Policy Review
Publication Date: 1995
Issue: Q III
Pages: 2-15