Access

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

If you need an accessible version of this item please contact JSTOR User Support

Banks' Demand for Excess Reserves

Peter A. Frost
Journal of Political Economy
Vol. 79, No. 4 (Jul. - Aug., 1971), pp. 805-825
Stable URL: http://www.jstor.org/stable/1830830
Page Count: 21
  • Read Online (Free)
  • Download ($14.00)
  • Subscribe ($19.50)
  • Cite this Item
If you need an accessible version of this item please contact JSTOR User Support
Banks' Demand for Excess Reserves
Preview not available

Abstract

A bank's demand function for excess reserves is derived using inventory theory. In the model, banks hold excess reserves as a means of reducing the cost of meeting their reserve requirements in a world in which they are faced with random reserve flows and transaction costs. The resulting demand curve is kinked at very low interest rates (estimated to be between 0.3 and 0.5 percent for the Treasury bill rate). This kinked demand curve offers an explanation of the large accumulation of excess reserves during the 1930s that compares favorably with alternative hypotheses.

Page Thumbnails

  • Thumbnail: Page 
805
    805
  • Thumbnail: Page 
806
    806
  • Thumbnail: Page 
807
    807
  • Thumbnail: Page 
808
    808
  • Thumbnail: Page 
809
    809
  • Thumbnail: Page 
810
    810
  • Thumbnail: Page 
811
    811
  • Thumbnail: Page 
812
    812
  • Thumbnail: Page 
813
    813
  • Thumbnail: Page 
814
    814
  • Thumbnail: Page 
815
    815
  • Thumbnail: Page 
816
    816
  • Thumbnail: Page 
817
    817
  • Thumbnail: Page 
818
    818
  • Thumbnail: Page 
819
    819
  • Thumbnail: Page 
820
    820
  • Thumbnail: Page 
821
    821
  • Thumbnail: Page 
822
    822
  • Thumbnail: Page 
823
    823
  • Thumbnail: Page 
824
    824
  • Thumbnail: Page 
825
    825