IDEAS home Printed from https://ideas.repec.org/a/ysm/ypfsfc/v4y2022i4p133-149.html
   My bibliography  Save this article

Reserve Requirements Survey

Author

Abstract

Banks have a private motive to hold some level of cash and liquid reserves, but the negative externalities of bank runs create a public interest in setting a regulatory level higher than the privately optimal level. We can think of such reserve requirements (RRs) as the original form of liquidity regulation. In this paper, we focus on 14 cases in which central banks adjusted RRs after crises hit, typically to deal with liquidity shortages in the banking system. We observe that RR adjustments have several advantages in a crisis: (1) such changes require little process, and the change for banks can be quick; (2) stigma concerns may be much lower than with emergency lending operations; (3) RRs can be used to fine-tune incentives for holding various types and maturities of assets; and (4) RR easing can complement a central bank's other liquidity support programs.

Suggested Citation

  • Metrick, Andrew, 2022. "Reserve Requirements Survey," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 4(4), pages 133-149, April.
    • Handle: RePEc:ysm:ypfsfc:v:4:y:2022:i:4:p:133-149
    as

    Download full text from publisher

    File URL: https://elischolar.library.yale.edu/cgi/viewcontent.cgi?article=1441&context=journal-of-financial-crises
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Carlos Montoro & Ramon Moreno, 2011. "The use of reserve requirements as a policy instrument in Latin America," BIS Quarterly Review, Bank for International Settlements, March.
    2. Decker, Bailey, 2022. "Peru: Reserve Requirements, GFC," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 4(4), pages 513-533, April.
    3. Runkel, Corey, 2022. "Thailand: Reserve Requirements, AFC," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 4(4), pages 576-595, April.
    4. Fulmer, Sean, 2022. "Brazil: Reserve Requirements, GFC," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 4(4), pages 338-361, April.
    5. Bank for International Settlements, 2012. "Operationalising the selection and application of macroprudential instruments," CGFS Papers, Bank for International Settlements, number 48, december.
    6. Mott, Carey, 2022. "India: Reserve Requirements, GFC," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 4(4), pages 456-478, April.
    7. Decker, Bailey, 2022. "Malaysia: Reserve Requirements, AFC," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 4(4), pages 494-512, April.
    8. Mott, Carey, 2022. "China: Reserve Requirements, 2015-2016," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 4(4), pages 393-428, April.
    9. Mott, Carey, 2022. "China: Reserve Requirements, GFC," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 4(4), pages 362-392, April.
    10. Decker, Bailey, 2022. "Colombia: Reserve Requirements, GFC," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 4(4), pages 429-441, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Esteban Gómez & Angélica Lizarazo & Juan Carlos Mendoza & Andrés Murcia, 2017. "Evaluating the Impact of Macroprudential Policies in Colombia's Credit Growth," Borradores de Economia 980, Banco de la Republica de Colombia.
    2. Gómez, Esteban & Murcia, Andrés & Lizarazo, Angélica & Mendoza, Juan Carlos, 2020. "Evaluating the impact of macroprudential policies on credit growth in Colombia," Journal of Financial Intermediation, Elsevier, vol. 42(C).
    3. Ma, Guonan & Xiandong, Yan & Xi, Liu, 2011. "China's evolving reserve requirements," BOFIT Discussion Papers 30/2011, Bank of Finland Institute for Emerging Economies (BOFIT).
    4. Joseph Bitar, 2022. "A note on reserve requirements and banks' liquidity," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4837-4852, October.
    5. Agénor, Pierre-Richard & Pereira da Silva, Luiz A., 2014. "Macroprudential regulation and the monetary transmission mechanism," Journal of Financial Stability, Elsevier, vol. 13(C), pages 44-63.
    6. Fendoğlu, Salih, 2017. "Credit cycles and capital flows: Effectiveness of the macroprudential policy framework in emerging market economies," Journal of Banking & Finance, Elsevier, vol. 79(C), pages 110-128.
    7. Bennani, T. & Després, M. & Dujardin, M. & Duprey, T. & Kelber, A., 2014. "Macroprudential framework:key questions applied to the French case," Occasional papers 9, Banque de France.
    8. Chen, Minghua & Wu, Ji & Jeon, Bang Nam & Wang, Rui, 2017. "Monetary policy and bank risk-taking: Evidence from emerging economies," Emerging Markets Review, Elsevier, vol. 31(C), pages 116-140.
    9. Ono, Arito & Uchida, Hirofumi & Udell, Gregory F. & Uesugi, Iichiro, 2021. "Lending pro-cyclicality and macroprudential policy: Evidence from Japanese LTV ratios," Journal of Financial Stability, Elsevier, vol. 53(C).
    10. Marco Vega & Adrian Armas & Paul Castillo, 2014. "Inflation Targeting and Quantitative Tightening: Effects of Reserve Requirements in Peru," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Fall 2014), pages 133-175, June.
    11. Katsuyuki Tanaka & Takuji Kinkyo & Shigeyuki Hamori, 2018. "Financial Hazard Map: Financial Vulnerability Predicted by a Random Forests Classification Model," Sustainability, MDPI, vol. 10(5), pages 1-18, May.
    12. Cantú, Carlos & Gondo, Rocio & Martínez, Berenice, 2019. "Reserve requirements as a financial stability instrument," Working Papers 2019-014, Banco Central de Reserva del Perú.
    13. Vinhado, Fernando da Silva & Divino, Jose Angelo, 2019. "Interactions between monetary and macroprudential policies in the transmission of discretionary shocks," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    14. Crespo Cuaresma, Jesus & von Schweinitz, Gregor & Wendt, Katharina, 2019. "On the empirics of reserve requirements and economic growth," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 253-274.
    15. Agénor, P.-R. & Alper, K. & Pereira da Silva, L., 2012. "Capital requirements and business cycles with credit market imperfections," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 687-705.
    16. Olszak, Małgorzata & Roszkowska, Sylwia & Kowalska, Iwona, 2018. "Macroprudential policy instruments and procyclicality of loan-loss provisions – Cross-country evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 54(C), pages 228-257.
    17. Radu Alin Morutan, 2015. "A View Of Macroeconomic Stability," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 720-727, December.
    18. Glocker, Christian, 2019. "Do reserve requirements reduce the risk of bank failure?," MPRA Paper 95634, University Library of Munich, Germany.
    19. Andrew Filardo & Stephen Grenville, 2012. "Central bank balance sheets and foreign exchange rate regimes: understanding the nexus in Asia," BIS Papers chapters, in: Bank for International Settlements (ed.), Are central bank balance sheets in Asia too large?, volume 66, pages 76-110, Bank for International Settlements.
    20. Cecilia Dassatti Camors & José-Luis Peydró & Francesc R Tous & Sergio Vicente, 2019. "Macroprudential and Monetary Policy: Loan-Level Evidence from Reserve Requirements," Working Papers 1091, Barcelona School of Economics.

    More about this item

    Keywords

    financial crisis intervention; liquidity; liquidity regulation; reserve requirement;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ysm:ypfsfc:v:4:y:2022:i:4:p:133-149. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/smyalus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.