Liquidity regulation and the implementation of monetary policy

Preprint OPEN
Morten L. Bech; Todd Keister;
(2013)
  • Subject: Basel III, Liquidity regulation, LCR, Reserves, Corridor system, Monetary policy

In addition to revamping existing rules for bank capital, Basel III introduces a new global framework for liquidity regulation. One part of this framework is the liquidity coverage ratio (LCR), which requires banks to hold sufficient high-quality liquid assets to surviv... View more
  • References (7)

    2 See, for example, Bindseil and Lamoot (2011) and Schmidt (2012). Bonner and Eijffinger (2013) study empirically the impact of the quantitative liquidity requirement introduced in Holland in 2003 on money markets there.

    4 Contributions to this literature include Dotsey (1991), Clouse and Dow (1999, 2002), Guthrie and Wright (2000), Bartolini, Bertola and Prati (2002), Bindseil (2004), Whitesell (2006), Ennis and Weinberg (2007), Ennis and Keister (2008), Bech and Klee (2011), and Afonso and Lagos (2012), among others.

    10 The type of framework studied here can be extended to include reserve averaging as shown by Clouse and Dow (1999), Bartolini, Bertola, and Prati (2002), Whitesell (2006), Ennis and Keister (2008), and others. 2 z [16] Ennis, Huberto M. and John A.Weinberg (2012) “Over-the-counter Loans, Adverse Selection,

    and Stigma in the Interbank Market,” Review of Economic Dynamics, forthcoming. [17] Goodfriend, Marvin (2002) “Interest on Reserves and Monetary Policy,” Federal Reserve Bank

    of New York Economic Policy Review 8 (May): 13-29. [18] Guthrie, Graeme, and Julian Wright (2000) “Open Mouth Operations,” Journal of Monetary

    Economics 46: 489-516. [20] Poole, William (1968) “Commercial Bank Reserve Management in a Stochastic Model: Impli-

    cations for Monetary Policy,” Journal of Finance 23: 769-791.

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