TY  - JOUR
AU  - Ireland,Peter N.
TI  - The Macroeconomic Effects of Interest on Reserves
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18409
PY  - 2012
Y2  - September 2012
UR  - http://www.nber.org/papers/w18409
L1  - http://www.nber.org/papers/w18409.pdf
N1  - Author contact info:
Peter N. Ireland
Boston College
Department of Economics
140 Commonwealth Ave.
Chestnut Hill, MA 02467-3859
Tel: 617/552-3687
Fax: 617/552-2308
E-Mail: irelandp@bc.edu
AB  - This paper uses a New Keynesian model with banks and deposits to study the macroeconomic effects of policies that pay interest on reserves. While their effects on output and inflation are small, these policies require major adjustments in the way that the monetary authority manages the supply of reserves, as liquidity effects vanish in the short run. In the long run, however, the additional degree of freedom the monetary authority acquires by paying interest on reserves is best described as affecting the real quantity of reserves: policy actions that change prices must still change the nominal quantity of reserves proportionally.
ER  -