Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/266103 
Year of Publication: 
2022
Series/Report no.: 
Staff Report No. 1019
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
Does the federal funds rate respond to shocks when aggregate reserves are in the trillions of dollars? Has banks' demand for reserves moved over time? We provide a structural time-varying estimate of the slope of the reserve demand curve over 2010-21. We estimate a time-varying vector autoregressive model at daily frequency with an instrumental variable approach to address endogeneity. Consistent with economic theory, our estimates show a nonlinear demand function that exhibits a negative slope in 2010-11 and 2018-19 but is flat over 2012-17 and after mid-2020. We also find that the curve has moved outward, both vertically and horizontally.
Subjects: 
demand for reserves
federal funds market
monetary policy
JEL: 
E41
E43
E52
E58
G21
Document Type: 
Working Paper

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