reserves

Innovation in Monetary Policy in Sweden Works: Negative Interest Rates

/ Jim Luke

The Sveriges  Riksbank (a.k.a.  Riksbanken), the Swedish central bank, tried an innovation in monetary policy two years ago in July 2009 when it set the official deposit rate at a negative interest rate of -.25%.  The objective was to stimulate and motivate banks to lend their "excess" reserves to businesses and households and to therefore … Continue reading Innovation in Monetary Policy in Sweden Works: Negative Interest Rates

Excess Bank Reserves: Theory vs. Reality

/ Jim Luke

In the macro econ textbooks, the mainstream explanation for money creation is the story of fractional reserve banking where reserves limit the amount of loans made.  In the traditional theory, the central bank (The Fed in U.S.) controls the amount of reserves banks have through either reserve reqmts or open-market operations.  Commercial banks are supposedly … Continue reading Excess Bank Reserves: Theory vs. Reality