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Is the Fed being swept out of (monetary) control?

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  • Jeffrey M. Wrase

Abstract

What are \\"reserves,\\" and why do banks hold them? What are \\"sweep accounts,\\" and how do they work? What?s the relationship between the two? And what?s the Fed?s role in all of this? In this article, Jeff Wrase considers the effect sweep accounts have had on the market for bank reserves and on the Fed?s job of managing reserves in the banking system. He also looks at changes the Federal Reserve has made to keep the federal funds rate from becoming too volatile as the use of sweep accounts spreads

Suggested Citation

  • Jeffrey M. Wrase, 1998. "Is the Fed being swept out of (monetary) control?," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 3-12.
    • Handle: RePEc:fip:fedpbr:y:1998:i:nov:p:3-12
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    File URL: https://www.philadelphiafed.org/-/media/frbp/assets/economy/articles/business-review/1998/november-december/brnd98jw.pdf
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    References listed on IDEAS

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    1. James A. Clouse & Douglas W. Elmendorf, 1997. "Declining required reserves and the volatility of the federal funds rate," Finance and Economics Discussion Series 1997-30, Board of Governors of the Federal Reserve System (U.S.).
    2. Craig H. Furfine, 1998. "Interbank payments and the daily federal funds rate," Finance and Economics Discussion Series 1998-31, Board of Governors of the Federal Reserve System (U.S.).
    3. Kevin Clinton, 1997. "Implementation of Monetary Policy in a Regime with Zero Reserve Requirements," Staff Working Papers 97-8, Bank of Canada.
    4. Joshua N. Feinman, 1993. "Reserve requirements: history, current practice, and potential reform," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jun, pages 569-589.
    5. Heidi Willmann Richards, 1995. "Daylight overdraft fees and the Federal Reserve's payment system risk policy," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Dec, pages 1065-1077.
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    Cited by:

    1. Green, Christopher & Bai, Ye & Murinde, Victor & Ngoka, Kethi & Maana, Isaya & Tiriongo, Samuel, 2016. "Overnight interbank markets and the determination of the interbank rate: A selective survey," International Review of Financial Analysis, Elsevier, vol. 44(C), pages 149-161.
    2. Selva Demiralp & Oscar Jorda, "undated". "The Pavlovian Response of Term Rates to Fed Announcements," Department of Economics 99-06, California Davis - Department of Economics.
    3. Paul R. Bergin & Oscar Jorda, "undated". "Monetary Policy Coordination: A New Empirical Approach," Department of Economics 01-02, California Davis - Department of Economics.
    4. Paul Bennett & Stavros Peristiani, 2002. "Are U.S. reserve requirements still binding?," Economic Policy Review, Federal Reserve Bank of New York, vol. 8(May), pages 53-68.
    5. Oscar Jorda & Paul Bergin, 2003. "Monetary Policy Coordination: A New Empirical Approach," Working Papers 12, University of California, Davis, Department of Economics.
    6. Nautz, Dieter & Schmidt, Sandra, 2009. "Monetary policy implementation and the federal funds rate," Journal of Banking & Finance, Elsevier, vol. 33(7), pages 1274-1284, July.
    7. Richard G. Anderson & Suresh K. Nair, 2005. "A specialized inventory problem in banks: optimizing retail sweeps," Working Papers 2005-023, Federal Reserve Bank of St. Louis.
    8. Selva Demiralp & Oscar Jorda, "undated". "The Pavlovian Response of Term Rates to Fed Announcements," Department of Economics 99-06, California Davis - Department of Economics.
    9. Dutkowsky, Donald H. & VanHoose, David D., 2011. "Interest on bank reserves and optimal sweeping," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2491-2497, September.
    10. Nippani, Srinivas & Pennathur, Anita K., 2004. "Day-of-the-week effects in commercial paper yield rates," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(4), pages 508-520, September.
    11. Hester,D.D., 2002. "U.S. banking in the last fifty years : growth and adaptation," Working papers 19, Wisconsin Madison - Social Systems.

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