When the Federal Reserve first started to pay interest on excess reserves in October 2008, it presented a choice that banks had not previously faced. That is, they could invest bank capital in excess reserves and earn the "better than" risk free rate or they could lend and earn a higher but...

Recent studies suggest liquidity regulation contributed to the rise in excess reserves, but capital regulations may matter, too. We use a simple model to show that banks may tilt portfolios away from higher risk-weighted assets like loans and toward lower risk-weighted assets like reserves and...

In response to the Great Recession, the Federal Reserve resorted to several unconventional policies that drastically altered the landscape of the federal funds market. The current environment, in which depository institutions are flush with excess reserves, has forced policymakers to design a...

This paper examines the limitations of the Chiang Mai Initiative Multilateralization (CMIM) as a regional financial safety net in East Asia, and proposes a new regional financial arrangement. To overcome the drawbacks of the CMIM, which has never been activated so far, a new regional financial...

This paper analyzes the relationship between bank lending and the Federal Reserve's policy of paying interest on excess reserves (IOER). We argue that the Fed's IOER policy deviates from the standard interest-rate floor framework in ways that influence banks' incentives to hold loans and...