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Federal Reserve Bank of Atlanta
FRB Atlanta Working Paper
A public finance analysis of multiple reserve requirements
Marco A. Espinosa-Vega
Steven Russell
Abstract

This paper analyzes multiple reserve requirements of the type that have been imposed by a number of developing countries. We show that previous theoretical work on this topic has not succeeded in providing a social welfare rationale for the existence of multiple reserve requirements. We go on to present a model in which it is possible for a multiple reserves regime to improve social welfare relative to simpler regimes involving reserve requirements and/or deposit taxes. We demonstrate the empirical plausibility of our approach by providing a case study of Mexico, a country with extensive historical experience with multiple reserve requirements.


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Marco A. Espinosa-Vega & Steven Russell, A public finance analysis of multiple reserve requirements, Federal Reserve Bank of Atlanta, FRB Atlanta Working Paper 99-19, 1999.
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Keywords: Finance; Public ; Developing countries ; Mexico ; Bank reserves
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