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On the liquidity coverage ratio and monetary policy implementation

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  • Morten Bech
  • Todd Keister

Abstract

Basel III introduces the first global framework for bank liquidity regulation. As monetary policy typically involves targeting the interest rate on interbank loans of the most liquid asset - central bank reserves - it is important to understand how this new requirement will impact the efficacy of current operational frameworks. Morten Bech (BIS) and Todd Keister (Rutgers University) extend a standard model of monetary policy implementation to include the new liquidity regulation. Based on this model, they find that the regulation does not impair central banks' ability to implement monetary policy, but operational frameworks may need to adjust.

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Bibliographic Info

Article provided by Bank for International Settlements in its journal BIS Quarterly Review.

Volume (Year): (2012)
Issue (Month): (December)
Pages:

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Handle: RePEc:bis:bisqtr:1212g

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References

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  1. Todd Keister & Antoine Martin & James McAndrews, 2008. "Divorcing money from monetary policy," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 41-56.
  2. Marvin Goodfriend, 2002. "Interest on reserves and monetary policy," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 77-84.
  3. Huberto M. Ennis & Todd Keister, 2008. "Understanding monetary policy implementation," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 235-263.
  4. William Poole, 1968. "Commercial Bank Reserve Management In A Stochastic Model: Implications For Monetary Policy," Journal of Finance, American Finance Association, vol. 23(5), pages 769-791, December.
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Cited by:
  1. Morten L Bech & Todd Keister, 2013. "On the Economics of Committed Liquidity Facilities," RBA Annual Conference Volume, in: Alexandra Heath & Matthew Lilley & Mark Manning (ed.), Liquidity and Funding Markets Reserve Bank of Australia.
  2. Antonio Scalia & Sergio Longoni & Tiziana Rosolin, 2013. "The Net Stable Funding Ratio and banks’ participation in monetary policy operations: some evidence for the euro area," Questioni di Economia e Finanza (Occasional Papers) 195, Bank of Italy, Economic Research and International Relations Area.

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