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Is the Fed being swept out of (monetary) control?

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  • Jeffrey M. Wrase

Abstract

What are "reserves," and why do banks hold them? What are "sweep accounts," and how do they work? What’s the relationship between the two? And what’s the Fed’s role in all of this? In this article, Jeff Wrase considers the effect sweep accounts have had on the market for bank reserves and on the Fed’s job of managing reserves in the banking system. He also looks at changes the Federal Reserve has made to keep the federal funds rate from becoming too volatile as the use of sweep accounts spreads

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Bibliographic Info

Article provided by Federal Reserve Bank of Philadelphia in its journal Business Review.

Volume (Year): (1998)
Issue (Month): Nov ()
Pages: 3-12

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Handle: RePEc:fip:fedpbr:y:1998:i:nov:p:3-12

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Keywords: Bank reserves ; Monetary policy - United States;

References

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  1. Heidi Willmann Richards, 1995. "Daylight overdraft fees and the Federal Reserve's payment system risk policy," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), Board of Governors of the Federal Reserve System (U.S.), issue Dec, pages 1065-1077.
  2. James A. Clouse & Douglas W. Elmendorf, 1997. "Declining required reserves and the volatility of the federal funds rate," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1997-30, Board of Governors of the Federal Reserve System (U.S.).
  3. Joshua N. Feinman, 1993. "Reserve requirements: history, current practice, and potential reform," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), Board of Governors of the Federal Reserve System (U.S.), issue Jun, pages 569-589.
  4. Kevin Clinton, 1997. "Implementation of Monetary Policy in a Regime with Zero Reserve Requirements," Working Papers, Bank of Canada 97-8, Bank of Canada.
  5. Craig Furfine, 1998. "Interbank payments and the daily federal funds rate," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1998-31, Board of Governors of the Federal Reserve System (U.S.).
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Cited by:
  1. Selva Demiralp & Oscar Jorda, . "The Pavlovian Response of Term Rates to Fed Announcements," Department of Economics, California Davis - Department of Economics 99-06, California Davis - Department of Economics.
  2. Oscar Jorda & Paul Bergin, 2003. "Monetary Policy Coordination: A New Empirical Approach," Working Papers, University of California, Davis, Department of Economics 12, University of California, Davis, Department of Economics.
  3. Nippani, Srinivas & Pennathur, Anita K., 2004. "Day-of-the-week effects in commercial paper yield rates," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 44(4), pages 508-520, September.
  4. Paul Bennett & Stavros Peristiani, 2002. "Are U.S. reserve requirements still binding?," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue May, pages 53-68.
  5. Suresh K. Nair & Richard G. Anderson, 2005. "A specialized inventory problem in banks: optimizing retail sweeps," Working Papers, Federal Reserve Bank of St. Louis 2005-023, Federal Reserve Bank of St. Louis.
  6. Hester,D.D., 2002. "U.S. banking in the last fifty years : growth and adaptation," Working papers, Wisconsin Madison - Social Systems 19, Wisconsin Madison - Social Systems.
  7. Nautz, Dieter & Schmidt, Sandra, 2009. "Monetary policy implementation and the federal funds rate," Journal of Banking & Finance, Elsevier, vol. 33(7), pages 1274-1284, July.
  8. Dutkowsky, Donald H. & VanHoose, David D., 2011. "Interest on bank reserves and optimal sweeping," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2491-2497, September.

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