Title: Excess Reserves in the 1930s: A Precautionary Tale
Abstract: Why do banks want to hold excess reserves? Required reserves include vault cash and deposits at the Federal Reserve. Excess reserves are deposits at the Federal Reserve in excess of those reserve requirements. Excess reserves can be used, for example, to pay depositors who want cash and to transfer funds to other banks. Excess reserves are part of banks’ total reserves, which also include required reserves. Banks can use required reserves only to satisfy their reserve requirements. In the normal course of business, required reserves are useless to a bank for any other purpose. Excess reserves are useful to a bank and not simply surplus reserves. If there were no reserve requirements, banks would still hold reserves.
Publication Year: 2010
Publication Date: 2010-01-01
Language: en
Type: article
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