Reserve Requirements, the Maturity Structure of Debt, and Bank Runs

Author/Editor:

Eza Ghassan Al-Zein

Publication Date:

April 1, 2008

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The paper looks at the relationship between reserve requirements and the choice of the maturity structure of external debt in a general equilibrium setup, by incorporating the role of international lenders. A date- and maturity-specific reserve requirement is a fraction of the debt to be deposited in a non-interest bearing account at the central bank. At maturity, the central bank returns the reserves. There exist some specific combinations of date- and maturity-specific reserve requirements that reduce the vulnerability to bank runs. In such setup, lenders may still want to provide new short-term lending to the bank after a bank run.

Series:

Working Paper No. 2008/108

Subject:

Banking Bonds Capital controls Real interest rates Reserve requirements

Frequency:

Biannually

English

Publication Date:

April 1, 2008

ISBN/ISSN:

9781451869682/1018-5941

Stock No:

WPIEA2008108

Pages:

26

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