How Abundant Are Reserves? Evidence from the Wholesale Payment System / Gara Afonso, Darrell Duffie, Lorenzo Rigon, Hyun Song Shin.

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Afonso, Gara

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w30736.Publication details: Cambridge, Mass. National Bureau of Economic Research 2022.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Before the era of large central bank balance sheets, banks relied on incoming payments to fund outgoing payments in order to conserve scarce liquidity. Even in the era of large central bank balance sheets, rather than funding payments with abundant reserve balances, we show that outgoing payments remain highly sensitive to incoming payments. By providing a window on liquidity constraints revealed by payment behavior, our results shed light on thresholds for the adequacy of reserve balances. Our findings are timely, given the ongoing shrinking of central bank balance sheets around the world in response to inflation.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w30736 (Browse shelf(Opens below))	Not For Loan

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December 2022.

Before the era of large central bank balance sheets, banks relied on incoming payments to fund outgoing payments in order to conserve scarce liquidity. Even in the era of large central bank balance sheets, rather than funding payments with abundant reserve balances, we show that outgoing payments remain highly sensitive to incoming payments. By providing a window on liquidity constraints revealed by payment behavior, our results shed light on thresholds for the adequacy of reserve balances. Our findings are timely, given the ongoing shrinking of central bank balance sheets around the world in response to inflation.