Year: 1990
Type: report
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.
DOI: 10.3386/w3381
Authors: Peter Garber, Steven Weisbrod
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1520749509