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Reserve Requirements, the Maturity Structure of Debt, and Bank Runs

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  • Eza Ghassan Al-Zein

Abstract

The paper looks at the relationship between reserve requirements and the choice of the maturity structure of external debt in a general equilibrium setup, by incorporating the role of international lenders. A date- and maturity-specific reserve requirement is a fraction of the debt to be deposited in a non-interest bearing account at the central bank. At maturity, the central bank returns the reserves. There exist some specific combinations of date- and maturity-specific reserve requirements that reduce the vulnerability to bank runs. In such setup, lenders may still want to provide new short-term lending to the bank after a bank run.

Suggested Citation

  • Eza Ghassan Al-Zein, 2008. "Reserve Requirements, the Maturity Structure of Debt, and Bank Runs," IMF Working Papers 08/108, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:08/108
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    References listed on IDEAS

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    More about this item

    Keywords

    External debt; Financial crisis; Central banks; Capital controls; Bank regulations; Loans; Reserve requirements; Sudden stops; Bank Runs; Crises; International Lending; Maturity; Term Structure; bank run; bond; bonds;

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