Authors: Gara Afonso, Kyungmin Kim, Antoine Martin, Ed Nosal, Simon Potter, and Sam Schulhofer-Wohl
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Staff Reports
Monetary Policy Implementation with an Ample Supply of Reserves
Number 910
January 2020 Revised January 2025
January 2020 Revised January 2025
JEL classification: E42, E58
We offer a parsimonious model of the reserve demand to study the trade-offs associated with various monetary policy implementation frameworks. Our model considers a reserve demand function that encompasses banks' preferences for reserves in the post 2007-2009 financial crisis world and incorporates shocks to the demand for and the supply of reserves. We find that the best policy implementation outcomes are realized when reserves are somewhere in between scarce and abundant. This outcome is consistent with the Federal Open Market Committee's 2019 announcement to implement monetary policy in a regime with an ample supply of reserves.
Author Disclosure Statement(s)
Gara Afonso
The author declares that she has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Kyungmin Kim
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Antoine Martin
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Ed Nosal
In regard to the article "Monetary Implementation with an Ample Supply of Reserves" co-authored with Gara Afonso, Kyungmin Kim, Antoine Martin, Simon Potter and Sam Schulhofer-Wohl, I have not received any financial support from any interested party, nor am I or was I a paid or unpaid officer, board member, or director of a relevant profit or non-profit organization.
Simon Potter
The author, Simon M. Potter, declares that he had no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Sam Schulhofer-Wohl
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
The author declares that she has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Kyungmin Kim
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Antoine Martin
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Ed Nosal
In regard to the article "Monetary Implementation with an Ample Supply of Reserves" co-authored with Gara Afonso, Kyungmin Kim, Antoine Martin, Simon Potter and Sam Schulhofer-Wohl, I have not received any financial support from any interested party, nor am I or was I a paid or unpaid officer, board member, or director of a relevant profit or non-profit organization.
Simon Potter
The author, Simon M. Potter, declares that he had no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Sam Schulhofer-Wohl
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
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