{"id":116010,"date":"2024-01-22T19:51:03","date_gmt":"2024-01-22T18:51:03","guid":{"rendered":"https:\/\/www.wifo.ac.at\/publication\/116010\/"},"modified":"2024-11-07T04:35:10","modified_gmt":"2024-11-07T03:35:10","slug":"the-macroeconomic-effects-of-reserve-requirements","status":"publish","type":"publication","link":"https:\/\/www.wifo.ac.at\/en\/publication\/116010\/","title":{"rendered":"The Macroeconomic Effects of Reserve Requirements"},"content":{"rendered":"","protected":false},"featured_media":0,"template":"","class_list":["post-116010","publication","type-publication","status-publish","hentry"],"acf":{"subtitle":"","text":"When dealing with credit booms driven by capital inflows, monetary authorities in emerging markets are often reluctant to raise interest rates, as they fear that an increase attracts even more capital and appreciates the currency. A number of countries therefore use reserve requirements as an additional policy instrument. The present study provides evidence on their macroeconomic effects. We estimate a vector autoregressive (VAR) model for the Brazilian economy and identify interest rate and reserve requirement shocks. For both instruments a discretionary tightening leads to a decline in domestic credit. We find, however, very different effects for other macroeconomic aggregates. In contrast to interest rate policy, a positive reserve requirement shock leads to an exchange rate depreciation and an improvement in the current account, but also to an increase in prices. The results suggest that reserve requirement policy can complement interest rate policy in pursuing a financial stability objective, but cannot be its substitute with regards to a price stability objective.","onlinedate":"2012-02-14 01:00:00","lang":"English","publication_series":"","publication_date":"20120201","publication_date_year":"","publication_date_full":false,"publication_num_pages":"39","keywords":"[\"Business Cycle\",\"Capital Flows\",\"Monetary Policy\",\"Reserve Requirements\"]","jelcodes":"[]","related_publications":"[]","pdf":342982,"zip":null,"link":"","monthly_report":true,"monthly_report_main":false,"monthly_report_volume":"","monthly_report_pages":"","monthly_report_pages_sort":"0","issue":"420","journal":"WIFO Working Papers","publisher":"","invisible":false,"external":false,"embargo_date":null,"types":[44410],"research_groups":[3500],"collaboration":"","persons":[3543,14863],"persons_data":"[{\"personId\":3543,\"personName\":\"Christian Glocker\",\"organisationNames\":[]},{\"personId\":14863,\"personName\":\"Pascal Towbin\",\"organisationNames\":[]}]","clients":[],"subclients":[],"partners":[],"topics":[],"host_publication_title":"","host_publication_subtitle":"","place_of_publication":"","host_publication_editors":"[]","type_description":"","output_media":"","chapter":"","article_number":"","citations":"{\"apa\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_apa rendering_contributiontoperiodical rendering_apa rendering_contributiontoperiodical_apa\\\"><span>Glocker, C.<\\\/span>, &amp; Towbin, P. (2012). <span>The Macroeconomic Effects of Reserve Requirements<\\\/span>. <span><em>WIFO Working Papers<\\\/em><\\\/span>, (420). <a onclick=\\\"window.open(this.href, '_blank','noopener,noreferrer'); return false;\\\" href=\\\"https:\\\/\\\/www.wifo.ac.at\\\/wwa\\\/pubid\\\/43532\\\" class=\\\"link\\\"><span>https:\\\/\\\/www.wifo.ac.at\\\/wwa\\\/pubid\\\/43532<\\\/span><\\\/a><\\\/div>\",\"vancouver\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_vancouver rendering_contributiontoperiodical rendering_vancouver rendering_contributiontoperiodical_vancouver\\\"><span>Glocker C<\\\/span>, Towbin P. <span class=\\\"title\\\"><span>The Macroeconomic Effects of Reserve Requirements<\\\/span><\\\/span>. <span>WIFO Working Papers<\\\/span>. 2012 Feb;(420).<\\\/div>\",\"bibtex\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_bibtex rendering_contributiontoperiodical rendering_bibtex rendering_contributiontoperiodical_bibtex\\\"><div>@misc{48a5293ceff54dd7a4aff1d523e2d4eb,<\\\/div><div>  title    = \\\"The Macroeconomic Effects of Reserve Requirements\\\",<\\\/div><div>  abstract = \\\"When dealing with credit booms driven by capital inflows, monetary authorities in emerging markets are often reluctant to raise interest rates, as they fear that an increase attracts even more capital and appreciates the currency. A number of countries therefore use reserve requirements as an additional policy instrument. The present study provides evidence on their macroeconomic effects. We estimate a vector autoregressive (VAR) model for the Brazilian economy and identify interest rate and reserve requirement shocks. For both instruments a discretionary tightening leads to a decline in domestic credit. We find, however, very different effects for other macroeconomic aggregates. In contrast to interest rate policy, a positive reserve requirement shock leads to an exchange rate depreciation and an improvement in the current account, but also to an increase in prices. The results suggest that reserve requirement policy can complement interest rate policy in pursuing a financial stability objective, but cannot be its substitute with regards to a price stability objective.\\\",<\\\/div><div>  keywords = \\\"Business Cycle, Capital Flows, Monetary Policy, Reserve Requirements, Business Cycle, Capital Flows, Monetary Policy, Reserve Requirements\\\",<\\\/div><div>  author   = \\\"Christian Glocker and Pascal Towbin\\\",<\\\/div><div>  year     = \\\"2012\\\",<\\\/div><div>  month    = feb,<\\\/div><div>  language = \\\"English\\\",<\\\/div><div>  journal  = \\\"WIFO Working Papers\\\",<\\\/div><p>}<\\\/p><\\\/div>\",\"ris\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_ris rendering_contributiontoperiodical rendering_ris rendering_contributiontoperiodical_ris\\\"><p>TY  - GEN<\\\/p><p>T1  - The Macroeconomic Effects of Reserve Requirements<\\\/p><p>AU  - Glocker, Christian<\\\/p><p>AU  - Towbin, Pascal<\\\/p><p>PY  - 2012\\\/2<\\\/p><p>Y1  - 2012\\\/2<\\\/p><p>N2  - When dealing with credit booms driven by capital inflows, monetary authorities in emerging markets are often reluctant to raise interest rates, as they fear that an increase attracts even more capital and appreciates the currency. A number of countries therefore use reserve requirements as an additional policy instrument. The present study provides evidence on their macroeconomic effects. We estimate a vector autoregressive (VAR) model for the Brazilian economy and identify interest rate and reserve requirement shocks. For both instruments a discretionary tightening leads to a decline in domestic credit. We find, however, very different effects for other macroeconomic aggregates. In contrast to interest rate policy, a positive reserve requirement shock leads to an exchange rate depreciation and an improvement in the current account, but also to an increase in prices. The results suggest that reserve requirement policy can complement interest rate policy in pursuing a financial stability objective, but cannot be its substitute with regards to a price stability objective.<\\\/p><p>AB  - When dealing with credit booms driven by capital inflows, monetary authorities in emerging markets are often reluctant to raise interest rates, as they fear that an increase attracts even more capital and appreciates the currency. A number of countries therefore use reserve requirements as an additional policy instrument. The present study provides evidence on their macroeconomic effects. We estimate a vector autoregressive (VAR) model for the Brazilian economy and identify interest rate and reserve requirement shocks. For both instruments a discretionary tightening leads to a decline in domestic credit. We find, however, very different effects for other macroeconomic aggregates. In contrast to interest rate policy, a positive reserve requirement shock leads to an exchange rate depreciation and an improvement in the current account, but also to an increase in prices. The results suggest that reserve requirement policy can complement interest rate policy in pursuing a financial stability objective, but cannot be its substitute with regards to a price stability objective.<\\\/p><p>KW  - Business Cycle<\\\/p><p>KW  - Capital Flows<\\\/p><p>KW  - Monetary Policy<\\\/p><p>KW  - Reserve Requirements<\\\/p><p>KW  - Business Cycle<\\\/p><p>KW  - Capital Flows<\\\/p><p>KW  - Monetary Policy<\\\/p><p>KW  - Reserve Requirements<\\\/p><p>M3  - WIFO series<\\\/p><p>JO  - WIFO Working Papers<\\\/p><p>JF  - WIFO Working Papers<\\\/p><p>ER  - <\\\/p><\\\/div>\"}","scientific_assistance":"[]","scientific_review":"[]","version":"","release_date":null,"expiration_date":null,"surveyor":"","research_assistance":"","edv":"","additional_info_de":"","additional_info_en":""},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.0 (Yoast SEO v28.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>The Macroeconomic Effects of Reserve Requirements - 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