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A public finance analysis of multiple reserve requirements

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  • Marco A. Espinosa-Vega
  • Steven Russell

Abstract

This paper analyzes multiple reserve requirements of the type that have been imposed by a number of developing countries. We show that previous theoretical work on this topic has not succeeded in providing a social welfare rationale for the existence of multiple reserve requirements. We go on to present a model in which it is possible for a multiple reserves regime to improve social welfare relative to simpler regimes involving reserve requirements and/or deposit taxes. We demonstrate the empirical plausibility of our approach by providing a case study of Mexico, a country with extensive historical experience with multiple reserve requirements.

Suggested Citation

  • Marco A. Espinosa-Vega & Steven Russell, 1999. "A public finance analysis of multiple reserve requirements," FRB Atlanta Working Paper 99-19, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedawp:99-19
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    References listed on IDEAS

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    9. Espinosa-Vega, Marco A. & Russell, Steven, 2001. "Are There Optimal Multiple-Reserve Requirements?," Journal of Financial Intermediation, Elsevier, vol. 10(1), pages 85-104, January.
    10. Marco A. Espinosa-Vega & Steven Russell, 1998. "A public finance analysis of multiple reserve requirements," FRB Atlanta Working Paper 98-1, Federal Reserve Bank of Atlanta.
    11. Espinosa-Vega, Marco A, 1995. "Multiple Reserve Requirements," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 762-776, August.
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    Cited by:

    1. Marco A. Espinosa-Vega & Steven Russell, 1998. "A public finance analysis of multiple reserve requirements," FRB Atlanta Working Paper 98-1, Federal Reserve Bank of Atlanta.
    2. Patrick Honohan, 2003. "Taxation of Financial Intermediation : Theory and Practice for Emerging Economines," World Bank Publications - Books, The World Bank Group, number 15122.

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    Keywords

    Finance; Public; Developing countries; Mexico; Bank reserves;
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