A note on US excess bank reserves and the credit contraction
AbstractThis paper reports aggregate bank excess liquidity preference curves for the pre-crisis and crisis periods. It is argued that the flat curve reflects a threshold lending rate at which point banks accumulate reserves passively. Moreover, the expansion of reserves – when the lending rate threshold is binding – does not lead to credit expansion. The latter would require policies that directly increase the demand for loans, particularly by the business sector.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 18702.
Date of creation: Oct 2009
Date of revision:
bank reserves; minimum loan interest rate; credit crunch;
Find related papers by JEL classification:
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-21 (All new papers)
- NEP-BAN-2009-11-21 (Banking)
- NEP-MAC-2009-11-21 (Macroeconomics)
- NEP-MON-2009-11-21 (Monetary Economics)
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