The Use of Reserve Requirements in an Optimal Monetary Policy Framework
We analyse three models to determine the conditions under which reserve requirements are used as a part of an optimal monetary policy framework in an inflation targeting regime. In all cases the Central Bank (CB) minimizes an objective function that depends on deviations of inflation from its target, the output gap and deviations of reserve requirements from its optimal long term level. In a closed economy model we find that optimal monetary policy implies setting reserve requirements at their long term level, while adjusting the policy interest rate to face macroeconomic shocks. Reserve requirements are included in an optimal monetary policy response in an open economy model with the same CB objective function and in a closed economy model in which the CB objective function includes financial stability. The relevance, magnitude and direction of the movements of reserve requirements depend on the parameters of the economy and the shocks that affect it.
|Date of creation:||Jul 2012|
|Date of revision:|
|Contact details of provider:|| Postal: Cra 7 # 14-78 Semi-sótano|
Phone: (57-1) 3431111
Fax: (57-1) 2841686
Web page: http://www.banrep.gov.co/es/publicaciones-buscador/23
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rocío Betancourt & Hernando Vargas, 2009.
"Encajes Bancarios Y Tasas De Interés,"
Ensayos sobre Política Económica,
Banco de la Republica de Colombia, vol. 27(59), pages 158-186, Junio.
- Hernando Vargas & Carlos Varela & Yanneth R. Betancourt & Norberto Rodríguez, .
"Effects of Reserve Requirements in an Inflation Targeting Regime: The Case of Colombia,"
Borradores de Economia
587, Banco de la Republica de Colombia.
- Hernando Vargas Herrera & Yanneth R Betancourt & Carlos Varela & Norberto Rodriguez, 2011. "Effects of reserve requirements in an inflation targeting regime: the case of Colombia," BIS Papers chapters, in: Bank for International Settlements (ed.), The global crisis and financial intermediation in emerging market economies, volume 54, pages 133-169 Bank for International Settlements.
- Hernando Vargas Herrera & Carlos Varela & Yanneth R. Betancourt & Norberto Rodríguez, 2010. "Effects of Reserve Requirements in an Inflation Targeting Regime: The Case of Colombia," BORRADORES DE ECONOMIA 006710, BANCO DE LA REPÚBLICA.
- Hernando Vargas H, 2011.
"Monetary policy and the exchange rate in Colombia,"
BIS Papers chapters,
in: Bank for International Settlements (ed.), Capital flows, commodity price movements and foreign exchange intervention, volume 57, pages 129-153
Bank for International Settlements.
- Christian Glocker & Pascal Towbin, 2012.
"Reserve Requirements for Price and Financial Stability: When Are They Effective?,"
International Journal of Central Banking,
International Journal of Central Banking, vol. 8(1), pages 65-114, March.
- Glocker, C. & Towbin, P., 2012. "Reserve Requirements for Price and Financial Stability - When Are They Effective?," Working papers 363, Banque de France.
- Christian Glocker & Pascal Towbin, 2012.
"The Macroeconomic Effects of Reserve Requirements,"
WIFO Working Papers
- Reinhart, Carmen M & Reinhart, Vincent R, 1999.
"On the Use of Reserve Requirements in Dealing with Capital Flow Problems,"
International Journal of Finance & Economics,
John Wiley & Sons, Ltd., vol. 4(1), pages 27-54, January.
- Reinhart, Carmen & Reinhart, Vincent, 1999. "On the use of reserve requirements in dealing with capital flow problems," MPRA Paper 13703, University Library of Munich, Germany.
- Ben S. Bernanke & Alan S. Blinder, 1988.
"Credit, Money, and Aggregate Demand,"
NBER Working Papers
2534, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:bdr:borrec:716i. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Clorith Angélica Bahos Olivera)
If references are entirely missing, you can add them using this form.