The Incidence of Reserve Requirements in Brazil: do Stockholders Share the Burden?
AbstractThere is consensus in the economic literature that reserve requirement is a tax levied upon financial intermediation. The incidence of the tax, however, is still a controversial issue. In this paper, we test whether the impact of changes in reserve requirements in the stock returns of the Brazilian financial system is different from the impact in stock returns of the rest of the economy. We find evidence that bank stock returns are not affected by changes in reserve requirements on demand deposits. In contrast, stock returns of non-financial institutions are substantially affected by such changes, suggesting that reserve requirements are a non-neutral instrument of monetary policy in Brazil. Reserve requirements on time deposits, however, are a tax paid by banks’ stockholders.
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Bibliographic InfoPaper provided by Departamento de Economia da Universidade de Brasilia in its series Working papers - Textos para Discussao do Departamento de Economia da Universidade de Brasilia with number 319.
Length: 28 pages
Date of creation: Aug 2004
Date of revision:
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Postal: Universidade de Brasília UnB - Campus Universitário Darcy Ribeiro Asa Norte CEP 70910-900, Brasília, Brasil
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Tax Incidence; Reserve Requirements; Event Studies;
Find related papers by JEL classification:
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
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- International Monetary Fund, 2011. "Policy Instruments To Lean Against The Wind In Latin America," IMF Working Papers 11/159, International Monetary Fund.
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