Changes in reserve requirements Changes in reserve requirements directly affect the amount of legal required reserves and thus change the amount of money a bank can lend out. For example,a required reserve ratio of 10%means that a bank with $100 in demand deposit liabilities outstanding must hold $10 in legal required reserves in support of the DDAs. ■ The bank can thus lend only 90 percent of its DDAs. 爸封强的黄香+孝
Changes in reserve Changes in reserve requirements requirements Changes in reserve requirements directly affect the amount of legal required reserves and thus change the amount of money a bank can lend out. For example, a required reserve ratio of 10% means that a bank with $100 in demand deposit liabilities outstanding must hold $10 in legal required reserves in support of the DDAs. The bank can thus lend only 90 percent of its DDAs
Required reserves Legal reserves vault cash and deposits at the Federal Reserve Bank. What determines required reserves? ■RR=rdd X DD+rtd X TD actually today,rtd =0 Why are required reserves so important? Recall that money (M1)is: M1 Cashnon bank public DD and DD=Reserves rdd --the money multiplier. 麓封强的黄香+孝
Required reserves Required reserves Legal reserves = vault cash and deposits at the Federal Reserve Bank. What determines required reserves? RR = rdd x DD + rtd x TD actually today, rtd = 0 Why are required reserves so important? Recall that money (M1) is: M1 = Cashnon bank public + DD and DD = Reserves / rdd --> the money multiplier
Sweep accounts Under the Federal Reserve's Regulation D, checkable deposit accounts such as demand deposits,ATS,NOW,and other checkable deposit (OCD)accounts have a 10%reserve requirement,but money market deposit accounts (MMDAs)are considered personal saving deposits and have a zero required reserve requirement ratio. 麓的贫香小手
Sweep accounts Sweep accounts Under the Federal Reserve’s Regulation D, checkable deposit accounts such as demand deposits, ATS, NOW, and other checkable deposit (OCD) accounts have a 10% reserve requirement, but money market deposit accounts (MMDAs) are considered personal saving deposits and have a zero required reserve requirement ratio
The impact of sweep accounts on required reserve balances 600 Monthly Averages of Initial AmountsCumulative Total 500 10 0 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 藏的黄香大孝
The impact of sweep accounts The impact of sweep accounts on required reserve balances on required reserve balances 0 100 200 300 400 500 600 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Billions of Dollars Monthly Averages of Initial Amounts Cumulative Total
Meeting legal reserve requirements Required reserves can be met over a two- week period. Reserves must be held to a fraction of its base liabilities. There are three elements of required reserves: 1.the dollar magnitude of base liabilities, 2.the required reserve fraction,and 3.the dollar magnitude of qualifying cash assets. 麓的贫香小手
Meeting legal reserve Meeting legal reserve requirements requirements Required reserves can be met over a twoweek period. Reserves must be held to a fraction of its base liabilities. There are three elements of required reserves: 1. the dollar magnitude of base liabilities, 2. the required reserve fraction, and 3. the dollar magnitude of qualifying cash assets