BANK RESERVE REQUIREMENTS AS AN IMPEDIMENT TO SIGNALING

STUART I. GREENBAUM; ANJAN V. THAKOR

doi:10.1111/j.1465-7295.1989.tb01164.x

BANK RESERVE REQUIREMENTS AS AN IMPEDIMENT TO SIGNALING

STUART I. GREENBAUM, ANJAN V. THAKOR

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Abstract

Effective legal reserve requirements may hamper the private capital market's ability to price bank deposits. in the model developed here, the market has less information about bank assets than the banks have, and a bank can therefore signal its superior information through its choice of excess reserves. Mandatory reserves can inhibit such signaling and therefore result in inefficient deposit pricing.

Original language	English
Pages (from-to)	75-91
Number of pages	17
Journal	Economic Inquiry
Volume	27
Issue number	1
DOIs	https://doi.org/10.1111/j.1465-7295.1989.tb01164.x
State	Published - Jan 1989

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title = "BANK RESERVE REQUIREMENTS AS AN IMPEDIMENT TO SIGNALING",

abstract = "Effective legal reserve requirements may hamper the private capital market's ability to price bank deposits. in the model developed here, the market has less information about bank assets than the banks have, and a bank can therefore signal its superior information through its choice of excess reserves. Mandatory reserves can inhibit such signaling and therefore result in inefficient deposit pricing.",

author = "GREENBAUM, {STUART I.} and THAKOR, {ANJAN V.}",

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AB - Effective legal reserve requirements may hamper the private capital market's ability to price bank deposits. in the model developed here, the market has less information about bank assets than the banks have, and a bank can therefore signal its superior information through its choice of excess reserves. Mandatory reserves can inhibit such signaling and therefore result in inefficient deposit pricing.

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BANK RESERVE REQUIREMENTS AS AN IMPEDIMENT TO SIGNALING

Abstract

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