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Liquid Asset Ratios and Financial Sector Reform

Author

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  • Ms. Anne Marie Gulde

Abstract

As a monetary, selective credit, and government debt-management instrument, a liquid asset ratio is generally inefficient and may introduce serious distortions. However, it may play a limited role as a prudential instrument, particularly in less sophisticated banking systems or in the context of currency board arrangements. Recent trends in the use of this instrument have been to either abolish it altogether or to design it so as to minimize distortions. When necessary, these changes have been part of a broader effort to make financial intermediation more efficient by relying more on markets and less on regulations.

Suggested Citation

  • Ms. Anne Marie Gulde, 1997. "Liquid Asset Ratios and Financial Sector Reform," IMF Working Papers 1997/144, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1997/144
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    Citations

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    Cited by:

    1. Eva Liebmann & Joe Peek, 2015. "Global standards for liquidity regulation," Current Policy Perspectives 15-3, Federal Reserve Bank of Boston.
    2. Mr. Ehsan Ebrahimy, 2019. "Liquidity Choice and Misallocation of Credit," IMF Working Papers 2019/284, International Monetary Fund.
    3. Winkler, Adalbert, 2001. "On the need for an international lender of last resort: Lessons from domestic financial markets," W.E.P. - Würzburg Economic Papers 28, University of Würzburg, Department of Economics.
    4. Ebrahimy, Ehsan, 2022. "Liquidity choice and misallocation of credit," European Economic Review, Elsevier, vol. 142(C).

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