AN EMPIRICAL-EXAMINATION OF BANK RESERVE MANAGEMENT BEHAVIOR

Bank regulators modify reserve accounting schemes for various purposes including to improve monetary control, simplify reserve account management, and decrease the reserve burden. However, the effect of modifications may not be as intended. Utilizing a micro-perspective we model the reserve management process, empirically estimate the model, and evaluate hypotheses concerning changes in the reserve accounting scheme. We find some unintended effects from modifications to the accounting scheme, tenuous support for the use of carryover as a futures in reserves instrument, and little change in banks ability to manage reserve balances as they moved from a lagged to a 'contemporaneous' reserve accounting environment. © 1990.