Scarce, abundant, or ample? : a time-varying model of the reserve demand curve

Gara Afonso, Domenico Giannone, Gabriele La Spada, John C. Williams

Does the federal funds rate respond to shocks when aggregate reserves are in the trillions of dollars? Has banks' demand for reserves moved over time? We provide a structural time-varying estimate of the slope of the reserve demand curve over 2010-21. We estimate a time-varying vector autoregressive model at daily frequency with an instrumental variable approach to address endogeneity. Consistent with economic theory, our estimates show a nonlinear demand function that exhibits a negative slope in 2010-11 and 2018-19 but is flat over 2012-17 and after mid-2020. We also find that the curve has moved outward, both vertically and horizontally.

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Year of publication:	[2022]
Authors:	Afonso, Gara ; Giannone, Domenico ; La Spada, Gabriele ; Williams, John C.
Publisher:	New York, NY : Federal Reserve Bank of New York
Subject:	demand for reserves \| federal funds market \| monetary policy \| Geldpolitik \| Monetary policy \| Theorie \| Theory \| Geldmarkt \| Money market \| Geldnachfrage \| Money demand \| Mindestreserve \| Reserve requirements \| Nachfrage \| Demand

Extent:	1 Online-Ressource (circa 54 Seiten) Illustrationen
Series:	Staff reports / Federal Reserve Bank of New York. - New York, NY : [Verlag nicht ermittelbar], ZDB-ID 2189304-4. - Vol. no. 1019 (May 2022)
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Graue Literatur ; Non-commercial literature ; Arbeitspapier ; Working Paper
Language:	English
Other identifiers:	hdl:10419/266103 [Handle]
Classification:	E41 - Demand for Money ; E43 - Determination of Interest Rates; Term Structure Interest Rates ; E52 - Monetary Policy (Targets, Instruments, and Effects) ; E58 - Central Banks and Their Policies ; G21 - Banks; Other Depository Institutions; Mortgages
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10013257201