|
|
|
|
Title: |
Eliminating Required Reserves: Does it Matter? |
| Author: |
Sephton, Peter
S. |
| Author
Affiliation: |
U New Brunswick |
| Source: |
International Economic Journal, Autumn 1990, v. 4, no. 3, pp. 69-75 |
|
Publication Date: |
Autumn 1990 |
|
Abstract: |
The Government of Canada has recently
announced its intention to eliminate reserve requirements at the
chartered banks. This paper investigates whether required reserves are
relevant for economic stabilization, using a prototype macro model
characterized by both contemporaneous and lagged bank reserve
accounting. It is shown that required reserves have no affect on
economic stability as long as the central bank can set the interest
elasticity of the supply of bank reserves. This adjustment depends on
the reserve accounting system in effect at the time of the regime shift. |
|
