Asset-based reserve requirements: reasserting domestic monetary control in an era of financial innovation and instability
AbstractThis paper argues for developing a new system of financial regulation based upon asset-based reserve requirements (ABRRs). Such a system represents a shift in regulatory focus away from the traditional concern with the liability side of financial intermediaries' balance sheets. ABRRs have both significant macroeconomic and microeconomic advantages. At the macroeconomic level, they can provide policy makers with additional policy instruments. This is particularly useful in light of recent concerns about the dangers of asset price inflation and the potential need to target asset prices. They can also help restore the traction of monetary policy at a time when banks are becoming a smaller part of the financial landscape. At the microeconomic level, they can be used to discourage excessive risk taking by financial intermediaries. Finally, they can also raise considerable seignorage. To be fully effective, a system of ABRRs should be applied to all financial intermediaries.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Review of Political Economy.
Volume (Year): 16 (2004)
Issue (Month): 1 ()
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