Retail deposit sweep programs: issues for measurement, modeling and analysis
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.
|Date of creation:||2003|
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- 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.