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Zonder onderwerpscode: economie

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Zonder onderwerpscode: economie

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In this paper we investigate how well banks manage their reserves. The optimal policy takes into account expected foregone interest on excess reserves and penalty costs for going below required reserves. Using a unique panel data-set on daily clearing house settlements of a cross-section of Mexican banks we estimate the deposit uncertainty banks face, and in turn their optimal reserve behavior. The most important variables for forecasting the deposit uncertainty are the interbank fund-transfers of the day, certain calendar dates, and the interest differential between the money market rate and the discount rate - a measure reflecting the bank's opportunity cost of money holdings. For most banks the model's prediction accord relatively well with the observed reserve behavior of banks. The model produces reserves costs that are significantly smaller relative to the case when reserves are set via simple rule of thumb. Furthermore, alternative motives for holding reserves (such as liquidity and reputation effects) do not seem to be the explanation for why certain banks hold relatively large reserves.

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This paper asks whether the asset pricing fluctuations induced by the presence of costly external finance are empirically plausible. To accomplish this, we incorporate costly external finance into a dynamic stochastic general equilibrium model and explore its implications for the properties of the returns on key financial assets, such as stocks, bonds and risky loans. We find that the mean and volatility of the equity premium, although small, are significantly higher than those in comparable adjustment cost models. However, we also show that these results require a procyclical financing premium, a property that seems at odds with the data.

Business cycles. --- Corporations --- Investments --- Finance.