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Defining the adjusted monetary base in an era of financial change


  • Richard G. Anderson
  • Robert H. Rasche


This paper examines how recent changes in the U.S. financial system have affected the appropriate definition, construction and interpretation of the St. Louis adjusted monetary base and adjusted reserves. Since 1990, reductions in statutory reserve requirements have significantly reduced the importance of the requirements as a constraint on the deposit and lending behavior of banks and other depository institutions. During the same period, depositories' interbank payments activities have come to determine most, if not all of their, demand for Federal Reserve Bank deposits. Our analysis suggests that measures of the monetary source base should be broadened to include all Federal Reserve deposits held by domestic depository institutions rather than just those deposits available to satisfy statutory reserve requirements, and that adjustments for the effects of changes in reserve requirements must recognize that many depositories' behavior is not affected by such requirements.

Suggested Citation

  • Richard G. Anderson & Robert H. Rasche, 1996. "Defining the adjusted monetary base in an era of financial change," Working Papers 1996-014, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:1996-014

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    References listed on IDEAS

    1. R. Alton Gilbert, 1978. "Effectiveness of state reserve requirements," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 16-28.
    2. Chari, V V & Christiano, Lawrence J & Eichenbaum, Martin, 1995. "Inside Money, Outside Money, and Short-Term Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1354-1386, November.
    3. Hoffman, Dennis L & Rasche, Robert H, 1991. "Long-Run Income and Interest Elasticities of Money Demand in the United States," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 665-674, November.
    4. George S. Tolley, 1957. "Providing for Growth of the Money Supply," Journal of Political Economy, University of Chicago Press, vol. 65, pages 465-465.
    5. Benston, George J, 1969. "An Analysis and Evaluation of Alternative Reserve Requirement Plans," Journal of Finance, American Finance Association, vol. 24(5), pages 849-870, December.
    6. Gambs, Carl M. & Rasche, Robert H., 1978. "Costs of reserves and the relative size of member and nonmember bank demand deposits," Journal of Monetary Economics, Elsevier, vol. 4(4), pages 715-733, November.
    7. Heidi Willmann Richards, 1995. "Daylight overdraft fees and the Federal Reserve's payment system risk policy," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Dec, pages 1065-1077.
    8. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
    9. Albert E. Burger & Robert H. Rasche, 1977. "Revision of the monetary base," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 13-28.
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    1. Richard G. Anderson & Robert H. Rasche, 1996. "A revised measure of the St. Louis adjusted monetary base," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 3-13.

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    Money supply ; Bank reserves;


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