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Retail deposit sweep programs: issues for measurement, modeling and analysis


  • Richard G. Anderson


Since January 1994, many banks in the United States have initiated retail-deposit sweep programs which reduce statutory reserve requirements by re-labeling transaction deposits as money market deposit accounts. As a result, approximately half of aggregate transaction deposits are now excluded from M1. This re-labeling is invisible to customers and, hence, cannot affect their demand for transaction balances. Nevertheless, a recent article in this Journal explored the effect of this invisible re-labeling on M1 demand. This note emphasizes that those results are spurious, and offers additional examples of measurement distortions due to retail deposit sweep activity.

Suggested Citation

  • Richard G. Anderson, 2003. "Retail deposit sweep programs: issues for measurement, modeling and analysis," Working Papers 2003-026, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2003-026

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    References listed on IDEAS

    1. Dutkowsky, Donald H & Cynamon, Barry Z, 2003. " Sweep Programs: The Fall of M1 and Rebirth of the Medium of Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(2), pages 263-279, April.
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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Negative nominal interest rates: back to the future?
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2015-02-09 19:26:52
    2. Nullzinsgrenze: Kosten für Lagerung und Sicherung
      by Acemaxx-Analytics in Acemaxx-Analytics on 2015-03-07 21:05:00


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    Cited by:

    1. Calza Alessandro & Zaghini Andrea, 2011. "Welfare Costs of Inflation and the Circulation of U.S. Currency Abroad," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-21, May.
    2. David Cook & Woon Gyu Choi, 2007. "Financial Market Risk and U.S. Money Demand," IMF Working Papers 07/89, International Monetary Fund.
    3. Peter N. Ireland, 2009. "On the Welfare Cost of Inflation and the Recent Behavior of Money Demand," American Economic Review, American Economic Association, vol. 99(3), pages 1040-1052, June.
    4. Calza, Alessandro & Zaghini, Andrea, 2010. "Sectoral money demand and the great disinflation in the US," Working Paper Series 1218, European Central Bank.
    5. Lotti, Francesca & Marcucci, Juri, 2007. "Revisiting the empirical evidence on firms' money demand," Journal of Economics and Business, Elsevier, vol. 59(1), pages 51-73.
    6. Duca, John V. & VanHoose, David D., 2004. "Recent developments in understanding the demand for money," Journal of Economics and Business, Elsevier, vol. 56(4), pages 247-272.

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    Bank reserves ; Money supply;

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