The Demand for Excess Reserves in the Euro Area and the Impact of the Current Credit Crisis
AbstractOne of the risks that banks need to manage, in their financial intermediation activities, is liquidity risk. Thus, banks hold reserves for precautionary reasons, in order to keep enough cash to meet their obligations. In this work, we analyze the demand for excess reserves by Euro Area banks, since the change in the framework of the single monetary policy in March 2004. Our main conclusions are that there is a positive relationship between the demand for reserves and its financing cost and also that the environment of uncertainty present in the credit crisis is not significant in the demand for excess reserves: the ECB achieved control over the money market tensions.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2010-01.
Length: 32 pages
Date of creation: Jan 2010
Date of revision:
banks; excess reserves; liquidity risk;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-16 (All new papers)
- NEP-BAN-2010-01-16 (Banking)
- NEP-CBA-2010-01-16 (Central Banking)
- NEP-EEC-2010-01-16 (European Economics)
- NEP-MON-2010-01-16 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nautz, Dieter, 1998. "Banks' demand for reserves when future monetary policy is uncertain," Journal of Monetary Economics, Elsevier, Elsevier, vol. 42(1), pages 161-183, June.
- Clouse, James A. & Dow Jr., James P., 1999. "Fixed costs and the behavior of the federal funds rate," Journal of Banking & Finance, Elsevier, Elsevier, vol. 23(7), pages 1015-1029, July.
- Donald S. Allen, 1998. "How closely do banks manage vault cash?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 43-54.
- Baltensperger, Ernst, 1980. "Alternative approaches to the theory of the banking firm," Journal of Monetary Economics, Elsevier, Elsevier, vol. 6(1), pages 1-37, January.
- Baltensperger, Ernst, 1974. "The Precautionary Demand for Reserves," American Economic Review, American Economic Association, American Economic Association, vol. 64(1), pages 205-10, March.
- Claudio E. V. Borio, 1997. "Monetary policy operating procedures in industrial countries," BIS Working Papers 40, Bank for International Settlements.
- de Haan, Leo & van den End, Jan Willem, 2013.
"Bank liquidity, the maturity ladder, and regulation,"
Journal of Banking & Finance, Elsevier,
Elsevier, vol. 37(10), pages 3930-3950.
- Leo de Haan & Jan Willem van den End, 2012. "Bank liquidity, the maturity ladder, and regulation," DNB Working Papers, Netherlands Central Bank, Research Department 346, Netherlands Central Bank, Research Department.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sara Santos).
If references are entirely missing, you can add them using this form.