tailieunhanh - Federal Reserve Bank of New York Staff Reports - Why Are Banks Holding So Many Excess Reserves?

Golden Jubilee Savings Bonds. In 2007 the Ghanaian government issued $50 million worth of five-year “Golden Jubilee” savings bonds, available for purchase at approved financial institutions until June 2008, to both Ghanaians living in Ghana and abroad. Its objective was to raise money for infrastructural development projects in all ten regions of the country, raise awareness of the importance of saving, and diversify financial instruments on offer to the market. Holders of the accrual bonds do not receive the fixed 15 to percent interest, compounded semiannually, until redemption. 403 Unfortunately, according to Strategic African Securities Limited (SAS), the lead advisors. | Federal Reserve Bank of New York Staff Reports Why Are Banks Holding So Many Excess Reserves Todd Keister James McAndrews Staff Report no. 380 July 2009 This paper presents preliminary findings and is being distributed to economists and other interested readers solely to stimulate discussion and elicit comments. The views expressed in the paper are those of the authors and are not necessarily reflective of views at the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors. Why Are Banks Holding So Many Excess Reserves Todd Keister and James McAndrews Federal Reserve Bank of New York Staff Reports no. 380 July 2009 JEL classification E58 G21 E51 Abstract The quantity of reserves in the . banking system has risen dramatically since September 2008. Some commentators have expressed concern that this pattern indicates that the Federal Reserve s liquidity facilities have been ineffective in promoting the flow of credit to firms and households. Others have argued that the high level of reserves will be inflationary. We explain through a series of examples why banks are currently holding so many reserves. The examples show how the quantity of bank reserves is determined by the size of the Federal Reserve s policy initiatives and in no way reflects the initiatives effects on bank lending. We also argue that a large increase in bank reserves need not be inflationary because the payment of interest on reserves allows the Federal Reserve to adjust short-term interest rates independently of the level of reserves. Key words bank reserves central bank liquidity facilities money multiplier Keister Federal Reserve Bank of New York e-mail . McAndrews Federal Reserve Bank of New York e-mail .We are grateful for helpful comments on earlier drafts from Gian Luca Clementi James Clouse Huberto Ennis Michael Feroli Kenneth Garbade Marvin Goodfriend Helios Herrera .