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Monthly Archives: February 2017

How to use Interest on Reserve for Inflation Targeting? | Q&A with Ricardo Reis |

This is the eighth installment of our interview series “Where is the General Theory of the 21st Century?”In this installment, we continue our talk with Professor Ricardo Reis, A.W. Phillips Professor of Economics at the London School of Economics. Reis has shared with us...

Performance of Macroeconomics is not that bad! | Q&A with Ricardo Reis |

In the interview, Ricardo Reis discuss with us his latest research project - "Reservism", the study of the role of reserves on central bank balance sheets and their implications for central bank solvency, quantitative easing, and the ability to control inflation.

What is Payment on Reserves Process?

The payment on reserve process proposed by Robert Hall and Ricardo Reis is a way of remunerating reserves which would give the central bank better control over the price level.The basic intuition is that given the central bank offer reserves that promised an indexed...

What is the Saturated Level of Reserves?

The Saturated Level of Reserves or efficient level of reserves, is the point which the opportunity cost for banks to hold reserves disappears, and became indifferent towards holding more reserves. The reserve demand curve beyond this point becomes close to horizontal.

Central Bank’s Balance Sheet and the Rise of Reserves

The above figure shows the balance sheet of four major central banks from 2005 to 2015. Above the horizontal axis is the asset side of the balance sheet, below is the liability side. All four central banks financed their purchases via overnight interest-paying voluntarily-held...