This paper examines the role of precautionary liquidity (reserves) and the inter- est on reserves as two potential determinants of the deposits channel that can help explain the role of monetary policy, particularly at the near zero-bound. Through the deposits channel either of these two...

This paper examines the role of the precautionary demand for liquidity and the interest on reserves as two potential determinants of the deposits channel that can help explain the role of monetary policy, particularly at the near zero-bound. At high levels of precautionary liquidity hoarding the...

This paper examines the potential role of the interest on reserves as a main monetary policy tool, in a model of financial intermediation with financial and nominal frictions calibrated to US data (1985-2018). The interest on reserves is shown to affect financial spreads and real economic...