Banks in the Market for Liquidity / Peter Garber, Steven Weisbrod.

By:

Garber, Peter

Contributor(s):

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w3381.Publication details: Cambridge, Mass. National Bureau of Economic Research 1990.Description: 1 online resource: illustrations (black and white)Online resources:

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Abstract: Banks are unique among financial institutions because they are the cheapest source of liquidity in the economy. Banks choose to hold reserves to facilitate settlement of end-of-day net due to positions arising from payments operations. Money market substitutes for bank liabilities do not escape from the cost of reserves since their issuers lean on banks to provide liquidity. Since the cost of reserves falls on all issuers of less liquid liabilities seeking access to payment services, including non-bank intermediaries, reserves cannot represent a tax on the banking system alone.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w3381 (Browse shelf(Opens below))	Not For Loan

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June 1990.

Banks are unique among financial institutions because they are the cheapest source of liquidity in the economy. Banks choose to hold reserves to facilitate settlement of end-of-day net due to positions arising from payments operations. Money market substitutes for bank liabilities do not escape from the cost of reserves since their issuers lean on banks to provide liquidity. Since the cost of reserves falls on all issuers of less liquid liabilities seeking access to payment services, including non-bank intermediaries, reserves cannot represent a tax on the banking system alone.