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Journal Article
How Have Banks Responded to Declining Reserve Balances?
Reserve balances have declined by more than $1 trillion since 2014, leading banks to increase their holdings of other high-quality assets to meet liquidity requirements. However, the composition of these assets varies substantially across banks, suggesting the drivers of demand for reserves are not uniform.
Working Paper
A User’s Guide to Reducing the Federal Reserve’s Balance Sheet
For the avoidance of doubt: 1) This catalogue presents and analyzes a variety of options for reducing the Federal Reserve’s balance sheet. Nothing here is an endorsement of any specific policy option; this is a menu of options. Combined, we estimate these options open the door to balance sheet reduction of $1.2 to $2.1 trillion within the Fed’s current ample reserves framework. Further reductions would be possible with a return to scarce reserves. 2) The process of materially shrinking the balance sheet would require a great deal of implementation and rulemaking work in advance and will ...
Working Paper
U.S. Banks and Global Liquidity
We characterize how U.S. global systemically important banks (GSIBs) supply short-term dollar liquidity in repo and foreign exchange swap markets in the post-Global Financial Crisis regulatory environment and serve as the "lenders-of-second-to-last-resort". Using daily supervisory bank balance sheet information, we find that U.S. GSIBs modestly increase their dollar liquidity provision in response to dollar funding shortages, particularly at period-ends, when the U.S. Treasury General Account balance increases, and during the balance sheet taper of the Federal Reserve. The increase in the ...