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Central Bank Balances and Reserve Requirements

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  • Simon Gray
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    Abstract

    Most central banks oblige depository institutions to hold minimum reserves against their liabilities, predominantly in the form of balances at the central bank. The role of these reserve requirements has evolved significantly over time. The overlay of changing purposes and practices has the result that it is not always fully clear what the current purpose of reserve requirements is, and this necessarily complicates thinking about how a reserve regime should be structured. This paper describes three main purposes for reserve requirements - prudential, monetary control and liquidity management - and suggests best practice for the structure of a reserves regime. Finally, the paper illustrates current practices using a 2010 IMF survey of 121 central banks.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/36.

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    Length: 56
    Date of creation: 01 Feb 2011
    Date of revision:
    Handle: RePEc:imf:imfwpa:11/36

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    Related research

    Keywords: Reserve requirements; Central bank policy; Monetary policy; Commercial banks; Depositories; Liquidity management; central bank; central banks; domestic currency; reserve requirement; monetary control; reserve holdings; reserve ratios; inflation; reserve bank; government securities; open market operations; monetary fund; currency board; monetary aggregates; domestic ? currency; reserve assets; monetary authority; monetary management; monetary target; gold reserves; reserve holding; monetary aggregate; reserve banks; money supply; monetary conditions; national bank; reserve asset; foreign loans; monetary reform; money market; balance of payments; minimum reserve requirements; monetary policy decision; monetary impact; money ? transfers; short ? term government securities; private bank; liquidity ? management; hong kong monetary authority; currency risk;

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    Cited by:
    1. Annabelle Mourougane, 2011. "Refining Macroeconomic Policies to Sustain Growth in Brazil," OECD Economics Department Working Papers 899, OECD Publishing.
    2. Choy, Marylin & Chang, Giancarlo, 2014. "Medidas Macroprudenciales aplicadas en el Perú," Working Papers 2014-007, Banco Central de Reserva del Perú.
    3. Mahir Binici & Bülent Köksal, 2013. "Do Bank Stockholders Share the Burden of Required Reserve Tax? Evidence from Turkey," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 49(4), pages 46-73, July.
    4. Keyra Primus, 2013. "'Excess Reserves, Monetary Policy and Financial Volatility," Centre for Growth and Business Cycle Research Discussion Paper Series 183, Economics, The Univeristy of Manchester.
    5. Leonardo S. Alencar, 2012. "Revisiting Bank Pricing Policies in Brazil: Evidence from Loan and Deposit Markets," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(67), pages 35-71, December.
    6. Tovar, Camilo & Garcia-Escribano, Mercedes & Vera, Mercedes, 2012. "El crecimiento del crédito y la efectividad de los requerimientos de encaje y otros instrumentos macroprudenciales en América Latina," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 24, pages 45-64.
    7. Michal Andrle & Andrew Berg & Enrico Berkes & Rafael A Portillo & Jan Vlcek & R. Armando Morales, 2013. "Money Targeting in a Modern Forecasting and Policy Analysis System: an Application to Kenya," IMF Working Papers 13/239, International Monetary Fund.
    8. Koray Alper & S. Tolga Tiryaki, 2011. "Zorunlu Karsiliklarin Para Politikasindaki Yeri," CBT Research Notes in Economics 1108, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    9. Primus, Keyra, 2013. "Excess Reserves, Monetary Policy and Financial Volatility," MPRA Paper 51670, University Library of Munich, Germany.

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