Internet Archive Scholar

Monetary Policy Implementation with an Ample Supply of Reserves

Gara Afonso, Federal Reserve Bank of New York, Kyungmin Kim, Antoine Martin, Ed Nosal, Simon Potter, Sam Schulhofer-Wohl, Board of Governors of the Federal Reserve System (U.S.), Federal Reserve Bank of New York, Federal Reserve Bank of Atlanta, Peterson Institute for International Economics, Federal Reserve Bank of Chicago
2020 Finance and Economics Discussion Series  

Preserved Fulltext

fulltext thumbnail
Web Archive Capture PDF (1.2 MB)
https://web.archive.org/web/20200709042039/https://www.federalreserve.gov/econres/feds/files/2020020pap.pdf

A copy of this work was available on the public web and has been preserved in the Wayback Machine. The capture dates from 2020; you can also visit the original URL. The file type is application/pdf.

Methods of monetary policy implementation continue to change. The level of reserve supply-scarce, abundant, or somewhere in between-has implications for the efficiency and effectiveness of an implementation regime. The money market events of September 2019 highlight the need for an analytical framework to better understand implementation regimes. We discuss major issues relevant to the choice of an implementation regime, using a parsimonious framework and drawing from the experience in the
more » ... d States since the 2007-09 financial crisis. We find that the optimal level of reserve supply likely lies somewhere between scarce and abundant reserves, thus highlighting the benefits of implementation with what could be called "ample" reserves. The Federal Reserve's announcement in October 2019 that it would maintain a level of reserve supply greater than the one that prevailed in early September is consistent with the implications of our framework.
doi:10.17016/feds.2020.020 fatcat:cl53zaqizrgm3eltgnpbpc2jsq
Citation

Gara Afonso, Federal Reserve Bank of New York, Kyungmin Kim, Antoine Martin, Ed Nosal, Simon Potter, Sam Schulhofer-Wohl, Board of Governors of the Federal Reserve System (U.S.), Federal Reserve Bank of New York, Federal Reserve Bank of Atlanta, Peterson Institute for International Economics, Federal Reserve Bank of Chicago. "Monetary Policy Implementation with an Ample Supply of Reserves." Finance and Economics Discussion Series 2020.020 (2020)