Bank reserves do not affect lending levels: NY Fed paper


A New York Federal Reserve paper published on Friday finds evidence showing the size of bank reserves has no effect on bank lending when interest is paid on reserves.

Antoine Martin, James McAndrews and David Skeie, the paper's authors, use a simple model of the US banking system to examine how reserves affect bank lending when interest is paid on reserves.

The results also show that the amount of lending is independent of the amount of reserves in the banking system. Martin, McAndrews and Skeie

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