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Large excess reserves in the U.S.: a view from the cross-section of banks

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  • Huberto M. Ennis
  • Alexander L. Wolman

Abstract

Bank reserves in the United States increased dramatically at the end of 2008. Subsequent asset purchase programs in 2009 and 2011 more than doubled the quantity of reserves outstanding. These events required major adjustments in banks' balance sheets. We study the evolution of reserve holdings across banks from the fall of 2008 until the middle of 2011 and document how banks' balance sheets changed concurrently. Motivated by the potential implications for monetary policy of operating with a high level of reserves, we focus particular attention on those banks which accumulated large quantities of reserves.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Richmond in its series Working Paper with number 12-05.

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Date of creation: 2012
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Handle: RePEc:fip:fedrwp:12-05

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Keywords: Interest ; Financial markets ; Inflation (Finance) ; Monetary policy;

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References

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  1. Todd Keister & James J. McAndrews, 2009. "Why are banks holding so many excess reserves?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 15(Dec).
  2. Efraim Benmelech, 2012. "An Empirical Analysis of the Fed's Term Auction Facility," NBER Working Papers 18304, National Bureau of Economic Research, Inc.
  3. James D. Hamilton & Jing Cynthia Wu, 2012. "The Effectiveness of Alternative Monetary Policy Tools in a Zero Lower Bound Environment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 3-46, 02.
  4. Adam Ashcraft & Morten L. Bech & W. Scott Frame, 2010. "The Federal Home Loan Bank System: The Lender of Next-to-Last Resort?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(4), pages 551-583, 06.
  5. Todd Keister & Antoine Martin & James McAndrews, 2008. "Divorcing money from monetary policy," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 41-56.
  6. William C. Dudley, 2011. "Prospects for the economy and monetary policy," Speech 45, Federal Reserve Bank of New York.
  7. Anil K. Kashyap & Raghuram Rajan & Jeremy C. Stein, 2002. "Banks as Liquidity Providers: An Explanation for the Coexistence of Lending and Deposit-Taking," Journal of Finance, American Finance Association, vol. 57(1), pages 33-73, 02.
  8. Carlson, Mark & Shan, Hui & Warusawitharana, Missaka, 2013. "Capital ratios and bank lending: A matched bank approach," Journal of Financial Intermediation, Elsevier, vol. 22(4), pages 663-687.
  9. Anil Kashyap & Jeremy C. Stein, 1993. "Monetary Policy and Bank Lending," NBER Working Papers 4317, National Bureau of Economic Research, Inc.
  10. Canzoneri, Matthew B & Cumby, Robert & Diba, Behzad & López-Salido, J David, 2008. "Monetary Aggregates and Liquidity in a Neo-Wicksellian Framework," CEPR Discussion Papers 6813, C.E.P.R. Discussion Papers.
  11. Charles I. Plosser, 2009. "Monetary policy and the wisdom of Wayne Gretzky," Speech 31, Federal Reserve Bank of Philadelphia.
  12. Huberto M. Ennis & Alexander L. Wolman, 2010. "Excess reserves and the new challenges for monetary policy," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, issue Mar.
  13. Michael J. Fleming & Nicholas J. Klagge, 2010. "The Federal Reserve's foreign exchange swap lines," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 16(Apr).
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