Minimum reserves are stabilising force – Bank of Italy study

Paper compares different mechanisms and their utility in floor and corridor regimes

Bank of Italy
The Bank of Italy
Photo: Aleksandrasana/Wikimedia Commons

Minimum reserve requirements are effective at generating predictable demand from commercial lenders for central bank credit, a new research paper finds.

The Bank of Italy paper examines the minimum reserve requirement system with averaging provision, used by the European Central Bank (ECB). 

It compares this with four other mechanisms: the carry-over of reserve balances, used historically by the US Federal Reserve; the voluntary reserves used by the Bank of England; and quotas such as those

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