This paper examines how retail sweep programs affect monetary asset substitution. Estimates from the Fourier flexible form reveal that sweeping generates systematic and sometimes large distortions in estimated bank depositor substitution elasticities.

This paper shows that changing the target Federal Funds rate induces changes in relative user costs of monetary assets. Estimated Morishima elasticities of substitution from the Fourier Flexible form reveal greater substitution from transactions assets and savings deposits into small time...