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Bank reserves. --- Bank reserves

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This paper focuses on the implications of using the monetary base or bank reserves as an instrument to control a monetary aggregate. Following analysis of a series of theoretical models of increasing complexity, it is concluded that in a system with either institutional or structural lags base control may entail very sharp and possibly undamped oscillations of short-term interest rates. The shorter the time period over which the authorities choose to bring the monetary aggregate back to its target, the more volatile will be the movements of interest rates. Furthermore, there is an asymmetry in the U.S. institutional structure such that rigid implementation of the base control system will under certain circumstances lead to a decline in short-term interest rates to very low levels. The final section of the paper is devoted to the examination of the Canadian institutional structure emphasizing the differences between the U.S. and Canadian systems.

Bank reserves.

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This paper uses disaggregated data on bank balance sheets to provide a test of the lending view of monetary policy transmission. We argue that if the lending view is correct, one should expect the loan and security portfolios of large and small banks to respond differentially to a contraction in monetary policy. We first develop this point with a theoretical model; we then test to see if the model's predictions are borne out in the data.

Bank reserves. --- Bank loans

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Bank reserves --- Foreign exchange

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Bank reserves --- Liquidity (Economics)