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- Title
RESERVE MEASURES AS OPERATING VARIABLES OF MONETARY POLICY: AN EMPIRICAL ANALYSIS.
- Authors
LAUFENBERG, DANIEL E.
- Abstract
The theory of money creation emphasizes the link between the stock of money and commercial bank reserves. It suggests that the monetary authority can best obtain its desired aggregate intermediate target by affecting the money creating potential of bank reserves, e.g., by changing the level of reserves while assuming that the reserve requirement ratio remains unchanged. The possibility of a reserve measure as the operating variable of monetary policy is empirically examined in this paper by attempting to determine the appropriate procedure to estimate the reserves-money relationship and to choose a reserve measure that performs best as the operating variable. Three procedures of estimating the reserves-money relationship are considered, with each representing a slightly different assumption about the relationship's stability and/or predictability. The three procedures, the naive multiplier procedure, the moving-average multiplier procedure, and the first-difference regression procedure, are discussed in Section II.C.
- Subjects
UNITED States; RESERVE requirements; BANK reserves; MONEY supply; MONETARY policy; DEPOSIT banking
- Publication
Journal of Finance (Wiley-Blackwell), 1976, Vol 31, Issue 3, p853
- ISSN
0022-1082
- Publication type
Article
- DOI
10.1111/j.1540-6261.1976.tb01928.x