The market valuation effects of reserve regulation

Myron B. Slovin, Marie Sushka, Yvette M. Bendeck

Research output: Contribution to journalArticle

13 Citations (Scopus)

Abstract

We demonstrate that the financial market's reaction to changes in reserve regulation implies that reserve requirements are an excise tax on banking activities. Changes in reserve requirements do not influence yields on Treasury securities or returns on broad-based portfolios of nonfinancial stocks and thus do not impound new information about monetary policy. Moreover, changes in reserve requirements have an impact on nonbank financial firms that is opposite in sign to that of banks. This suggests that reserve requirements shift the locus of some financial activities from the banking sector to the nonbank sector of the financial system.

Original languageEnglish (US)
Pages (from-to)3-19
Number of pages17
JournalJournal of Monetary Economics
Volume25
Issue number1
DOIs
StatePublished - 1990

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Valuation effects
Market valuation
Reserve requirements
Banking
Excise tax
Treasury securities
Monetary policy
Market reaction
Financial markets
Financial system
Banking sector

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance

Cite this

The market valuation effects of reserve regulation. / Slovin, Myron B.; Sushka, Marie; Bendeck, Yvette M.

In: Journal of Monetary Economics, Vol. 25, No. 1, 1990, p. 3-19.

Research output: Contribution to journalArticle

Slovin, Myron B. ; Sushka, Marie ; Bendeck, Yvette M. / The market valuation effects of reserve regulation. In: Journal of Monetary Economics. 1990 ; Vol. 25, No. 1. pp. 3-19.
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