The Carry‐Forward Provision and Management of Bank Reserves

  • Author(s): RICHARD M. FRIEDMAN, WILLIAM W. ROBERTS
  • Published: Apr 30, 2012
  • Pages: 845-855
  • DOI: 10.1111/j.1540-6261.1983.tb02505.x

ABSTRACT

The 1968 amendment to Regulation D of the Federal Reserve Code permits banks to carry forward one sequential reserve excess or deficiency into the next reserve accounting period. This was intended to reduce the weekly pressure on individual banks to adjust their reserve position. We find, instead, that the carry‐forward provision gives individual banks an incentive to alternate weekly between reserve excesses and reserve deficiencies. Thus, the carry‐forward provision tends to induce reserve position adjustments even in the absence of changes in the level of deposits. In addition, the carry‐forward provision reduces the impact of interest‐rate changes on the desired level of excess reserves.

Jump to menu

Main Navigation

Search the Site / Journal

Search Keywords

Search Tips

Members' Login

Credentials

Members' Options

Site Footer

View Mobile Version