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Multiple Reserve Requirements

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  • Espinosa-Vega, Marco A

Abstract

This paper investigates the consequences of government imposition of multiple reserve requirements on commercial banks. In particular, it examines a situation in which banks are required to hold some fraction of their customer's deposits in the form of domestic currency and another fraction in the form of interest bearing government bonds. Proponents of such requirements claim that for a given deficit, a multiple reserve scheme leads to a lower rate of inflation than would occur under a single reserve regime. I construct a model which provides a framework for analyzing this view. The analysis does not focus exclusively on the inflationary effect of alternative reserve regimes. The model also allows for welfare analysis. Copyright 1995 by Ohio State University Press.

Suggested Citation

  • Espinosa-Vega, Marco A, 1995. "Multiple Reserve Requirements," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 762-776, August.
  • Handle: RePEc:mcb:jmoncb:v:27:y:1995:i:3:p:762-76
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    Cited by:

    1. Espinosa-Vega, Marco A. & Russell, Steven, 2001. "Are There Optimal Multiple-Reserve Requirements?," Journal of Financial Intermediation, Elsevier, vol. 10(1), pages 85-104, January.
    2. Marco A. Espinosa-Vega & Steven Russell, 1998. "A public finance analysis of multiple reserve requirements," FRB Atlanta Working Paper 98-1, Federal Reserve Bank of Atlanta.
    3. Rangan Gupta, 2005. "Costly State Monitoring and Reserve Requirements," Annals of Economics and Finance, Society for AEF, vol. 6(2), pages 263-288, November.
    4. de Paso, Jose I. Garcia, 1997. "Multiple reserve requirements: an irrelevance result," Economics Letters, Elsevier, vol. 56(3), pages 333-338, November.
    5. Patrice Robitaille, 2011. "Liquidity and reserve requirements in Brazil," International Finance Discussion Papers 1021, Board of Governors of the Federal Reserve System (U.S.).
    6. Marco A. Espinosa-Vega & Bruce D. Smith & Chong K. Yip, 1998. "On government credit programs," FRB Atlanta Working Paper 98-2, Federal Reserve Bank of Atlanta.
    7. Marco A. Espinosa-Vega & Steven Russell, 1996. "The Mexican economic crisis: alternative views," Economic Review, Federal Reserve Bank of Atlanta, issue Jan, pages 21-44.
    8. Espinosa-Vega, Marco A. & Smith, Bruce D. & Yip, Chong K., 2002. "Monetary Policy and Government Credit Programs," Journal of Financial Intermediation, Elsevier, vol. 11(3), pages 232-268, July.
    9. Limodio,Nicola & Strobbe,Francesco, 2016. "Financial regulation and government revenue : the effects of a policy change in Ethiopia," Policy Research Working Paper Series 7733, The World Bank.
    10. Bas Aarle & Nina Budina, 1997. "Financial repression, money growth, and seignorage: The Polish experience," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(4), pages 683-707, December.
    11. Hung, Fu-Sheng, 2005. "Optimal composition of government public capital financing," Journal of Macroeconomics, Elsevier, vol. 27(4), pages 704-723, December.
    12. Patrick Honohan, 2003. "Taxation of Financial Intermediation : Theory and Practice for Emerging Economines," World Bank Publications, The World Bank, number 15122.

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