IDEAS home Printed from https://ideas.repec.org/a/cup/jfinqa/v7y1972i05p2031-2054_01.html
   My bibliography  Save this article

Optimal Management of Bank Reserves

Author

Listed:
  • Brown, George F.

Abstract

This paper has considered the sequence of optimal credit expansion decisions of a bank operating under the legal structure imposed by the Federal Reserve System. Two alternative structures are considered, one relating to the pre-September 1968 period and the other to the currently enforced one. Using dynamic programming techniques, a closed-form equation for the optimal credit expansion decision has been derived in each case. The optimal level of credit expansion has been shown to be a nonlinear function of the prevailing interest rate, the parameters of the distribution of reserve losses, and several parameters set by Federal Reserve policy. The presence of uncertainty in the model has been shown to have an indefinite effect; however, several policy parameters may be chosen so as either to restrict or to encourage expansion to levels below or above the simple certainty prediction. These results are intuitively in accord with those of general inventory studies.

Suggested Citation

  • Brown, George F., 1972. "Optimal Management of Bank Reserves," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 7(5), pages 2031-2054, December.
    • Handle: RePEc:cup:jfinqa:v:7:y:1972:i:05:p:2031-2054_01
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0022109000017932/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:7:y:1972:i:05:p:2031-2054_01. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/jfq .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.