Fed’s policy framework may incentivise reserves hoarding
The Federal Reserve’s monetary policy framework could be inducing some commercial banks to hoard reserves, but this does not appear to be harming bank lending, a new study finds.
The research, by Fed economists Marcelo Rezende, Judit Temesvary and Rebecca Zarutskie, exploits the US central bank’s “technical adjustments” to its policy framework, whereby it adjusted the interest rate on excess reserves (IOER) relative to the target band. The authors use these adjustments to isolate how changes in
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