Falling reserve balances and the federal funds rate

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Falling reserve balances and the federal funds rate

Author Info

Paul Bennett
Spence Hilton

Abstract

The growth of "sweeps"--a banking practice in which depository institutions shift funds out of customer accounts subject to reserve requirements--has reduced the required balances held by banks in their accounts at the Federal Reserve. This development could lead to greater volatility in the federal funds rate as banks try to manage their accounts with very low balances. An analysis of the evidence suggests that the volatility of the funds rate is rising slightly, but not enough to disrupt the federal funds market or affect the implementation of monetary policy.

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Publisher Info
Article provided by Federal Reserve Bank of New York in its journal Current Issues in Economics and Finance.

Volume (Year): (1997)
Issue (Month): May ()
Pages:
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Handle: RePEc:fip:fednci:y:1997:i:may:n:v.3no.5

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

E.J. Stevens, 1993. "Required clearing balances," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 2-14. [Downloadable!]

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Richard G. Anderson & Robert H. Rasche, 2000. "Retail sweep programs and bank reserves, 1994--1999," Working Papers 2000-023, Federal Reserve Bank of St. Louis. [Downloadable!]
Other versions:
- Richard G. Anderson & Robert H. Rasche, 2001. "Retail sweep programs and bank reserves, 1994-1999," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 51-72. [Downloadable!]
Craig Furfine, 1998. "Interbank payments and the daily federal funds rate," Finance and Economics Discussion Series 1998-31, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
Leonardo Bartolini & Alessandro Prati, 2003. "The execution of monetary policy: a tale of two central banks," Staff Reports 165, Federal Reserve Bank of New York. [Downloadable!]
Other versions:
- Leonardo Bartolini & Alessandro Prati, 2003. "The execution of monetary policy: a tale of two central banks," Economic Policy, CEPR, CES, MSH, vol. 18(37), pages 435-467, October. [Downloadable!] (restricted)
Leonardo Bartolini & Giuseppe Bertola & Alessandro Prati, 2000. "Day-to-day monetary policy and the volatility of the federal funds interest rate," Staff Reports 110, Federal Reserve Bank of New York. [Downloadable!]
Other versions:
- Alessandro Prati & Leonardo Bartolini & Giuseppe Bertola, . "Day-To-Day Monetary Policy and the Volatility of the Federal Funds Interest Rate," IMF Working Papers 00/206, International Monetary Fund.
- Bartolini, Leonardo & Bertola, Giuseppe & Prati, Alessandro, 2002. "Day-to-Day Monetary Policy and the Volatility of the Federal Funds Interest Rate," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 137-59, February.
Suresh K. Nair & Richard G. Anderson, 2005. "A specialized inventory problem in banks: optimizing retail sweeps," Working Papers 2005-023, Federal Reserve Bank of St. Louis. [Downloadable!]
Bartolini, Leonardo & Bertola, Giuseppe & Prati, Alessandro, 2002. "The Overnight Interbank Market: Evidence from the G7 and the Euro Zone," CEPR Discussion Papers 3090, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Other versions:
- Alessandro Prati & Leonardo Bartolini & Giuseppe Bertola, 2001. "The overnight interbank market: evidence from the G-7 and the Euro zone," Staff Reports 135, Federal Reserve Bank of New York. [Downloadable!]
- Prati, Alessandro & Bartolini, Leonardo & Bertola, Giuseppe, 2003. "The overnight interbank market: Evidence from the G-7 and the Euro zone," Journal of Banking & Finance, Elsevier, vol. 27(10), pages 2045-2083, October. [Downloadable!] (restricted)
Paul Bennett & Stavros Peristiani, 2002. "Are U.S. reserve requirements still binding?," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 53-68. [Downloadable!]
Athanasios Orphanides, 2001. "Expectations, open market operations, and changes in the federal funds rate (commentary)," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 33-58. [Downloadable!]
Spence Hilton, 2005. "Trends in federal funds rate volatility," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Jul. [Downloadable!]
Richard G. Anderson & Robert H. Rasche, 2000. "The domestic adjusted monetary base," Working Papers 2000-002, Federal Reserve Bank of St. Louis. [Downloadable!]

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