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The Problem of Excess Reserves, Then and Now

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  • Walker F. Todd

Abstract

This working paper looks at excess reserves in historical context and analyzes whether they constitute a monetary policy problem for the Federal Reserve System (the "Fed") or a potential-ly inflationary problem for the rest of us. Generally, this analysis shows that both absolute and relative sizes of excess reserves are a big problem for the Fed as well as the general public because of their inflationary potential. However, like all contingencies, the timing and extent of the damage that reserve-driven inflation might cause are uncertain. It is even possible today to find articles in both scholarly circles and the popular press arguing either that the inflationary blow-off might never happen or that an increasing tendency toward prolonged deflation is the more probable outcome.

Suggested Citation

  • Walker F. Todd, 2013. "The Problem of Excess Reserves, Then and Now," Economics Working Paper Archive wp_763, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_763
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    File URL: http://www.levyinstitute.org/pubs/wp_763.pdf
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    Cited by:

    1. William Greider, 2013. "Debt Relief and the Fed's Money-creation Power," Economics Policy Note Archive 13-07, Levy Economics Institute.
    2. Mamatzakis, Emmanuel & Bermpei, Theodora, 2016. "What is the effect of unconventional monetary policy on bank performance?," Journal of International Money and Finance, Elsevier, vol. 67(C), pages 239-263.

    More about this item

    Keywords

    Excess Reserves; Federal Reserve; Fed; European Central Bank; ECB; Quantitative Easing; Monetary Stimulus;

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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