On December 12, 2019, Fed in Print will introduce its new platform for discovering content. Please direct your questions to Anna Oates
Federal Reserve Bank of New York
The payment system benefits of high reserve balances
The policy measures taken since the financial crisis have greatly expanded the size of the Federal Reserve’s balance sheet and have thus raised the level of aggregate bank reserves as well. Over the same period there has been a significant shift in the timing of payments made over the Federal Reserve’s Fedwire Funds Service toward earlier settlement. This paper documents this timing change and presents regression results suggesting that the increase in overall reserve balances explains the vast majority of this development. The paper also discusses the benefits of high aggregate reserve balances for the robustness of the payment system and the potential implications for policy going forward.
Cite this item
James J. McAndrews & Alexander Kroeger, The payment system benefits of high reserve balances, Federal Reserve Bank of New York, Staff Reports 779, 01 Jun 2016.
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
Keywords: Fedwire; settlement liquidity; reserves; monetary policy implementation
This item with handle RePEc:fip:fednsr:779
is also listed on EconPapers
For corrections, contact Amy Farber ()