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The Problem of Excess Reserves, Then and Now

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  • Walker F. Todd
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    Abstract

    This working paper looks at excess reserves in historical context and analyzes whether they constitute a monetary policy problem for the Federal Reserve System (the "Fed") or a potential-ly inflationary problem for the rest of us. Generally, this analysis shows that both absolute and relative sizes of excess reserves are a big problem for the Fed as well as the general public because of their inflationary potential. However, like all contingencies, the timing and extent of the damage that reserve-driven inflation might cause are uncertain. It is even possible today to find articles in both scholarly circles and the popular press arguing either that the inflationary blow-off might never happen or that an increasing tendency toward prolonged deflation is the more probable outcome.

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    File URL: http://www.levyinstitute.org/pubs/wp_763.pdf
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    Bibliographic Info

    Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_763.

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    Date of creation: May 2013
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    Handle: RePEc:lev:wrkpap:wp_763

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    Web page: http://www.levyinstitute.org

    Related research

    Keywords: Excess Reserves; Federal Reserve; Fed; European Central Bank; ECB; Quantitative Easing; Monetary Stimulus;

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    Cited by:
    1. William Greider, 2013. "Debt Relief and the Fed's Money-creation Power," Economics Policy Note Archive 13-07, Levy Economics Institute.

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