A number of developing countries have adopted deficit-finance regimes involving multiple reserve requirements. One question the previous literature on this phenomenon has not addressed is whether multiple-reserves regimes can improve on regimes involving single-currency-reserve requirements if the policy settings of the latter regimes are assumed to be chosen optimally. We find that a "conventional" multiple-reserves regime--a regime with positive nominal rates on reservable bonds--cannot Pareto-improve an optimal single-currency-regime but can, in some cases, increase social welfare over such a regime.
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Publisher Info
Paper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number
96-18.
Length: Date of creation: 1996 Date of revision: Publication status: Published in Journal of Financial Intermediation, January 2001 Handle: RePEc:fip:fedawp:96-18
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