Title

An Examination Of The 1992 Increase In The Allowable Carryover Of Reserves In The Bank Settlement Process

Keywords

Allowable carryover; Federal reserve settlement

Abstract

This paper examines the Federal Reserve’s increase of the allowable carryover in the bank settlement process to improve bank flexibility in achieving settlement. The implication of increasing flexibility is reduced rate volatility. We find federal funds loan volume increases, but find no evidence of a reduction in federal funds rate volatility. These results are consistent with the increased carryover creating a profitable loan opportunity without changing the incentives that create the identified patterns in federal funds. We believe the difference between our results and the Federal Reserve’s intention, derive from the difference in the trading behavior of the marginal and average bank. © 2000 Blackwell Publishing Ltd.

Publication Date

1-1-2000

Publication Title

Financial Review

Volume

35

Issue

1

Number of Pages

67-84

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1111/j.1540-6288.2000.tb01407.x

Socpus ID

85040397426 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/85040397426

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