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Reserve Demand Estimation: A Proposal

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Abstract

Monetary policy implementation can be framed in terms of the demand for reserves: the relationship between the quantity of reserves held at the Fed and the average rate at which banks trade in interbank markets. We propose a new econometric strategy to estimate the demand for reserves, which incorporates core restriction derived from theory models yet remains flexible and easy to implement. We compare our estimates of the demand for reserves with other available approaches.

Suggested Citation

  • Ricardo Lagos & Gaston Navarro, 2026. "Reserve Demand Estimation: A Proposal," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, vol. 26(13), April.
    • Handle: RePEc:fip:fedreb:103028
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