Reserves Were Not so Ample after All

Adam COPELAND; Darrell DUFFIE; Yilin (David) YANG

doi:10.1093/qje/qjae034

Reserves Were Not so Ample after All

Adam COPELAND, Darrell DUFFIE, Yilin (David) YANG

Department of Economics and Finance

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

Abstract

We show that the likelihood of a liquidity crunch in wholesale U.S. dollar funding markets depends on levels of reserve balances at the financial institutions that are the most active intermediaries of these markets. Heightened risk of an imminent liquidity crunch is signaled by significant delays in intraday payments to these large financial institutions over the prior two weeks. Our study contributes to the broader dialogue surrounding the Federal Reserve's ongoing quantitative tightening. © The Author(s) 2024.

Original language	English
Pages (from-to)	239-281
Journal	The Quarterly Journal of Economics
Volume	140
Issue number	1
Online published	26 Oct 2024
DOIs	https://doi.org/10.1093/qje/qjae034
Publication status	Published - Feb 2025

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Full text of this publication does not contain sufficient affiliation information. With consent from the author(s) concerned, the Research Unit(s) information for this record is based on the existing academic department affiliation of the author(s).

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N2 - We show that the likelihood of a liquidity crunch in wholesale U.S. dollar funding markets depends on levels of reserve balances at the financial institutions that are the most active intermediaries of these markets. Heightened risk of an imminent liquidity crunch is signaled by significant delays in intraday payments to these large financial institutions over the prior two weeks. Our study contributes to the broader dialogue surrounding the Federal Reserve's ongoing quantitative tightening. © The Author(s) 2024.

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Reserves Were Not so Ample after All

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