Reserve Requirements

Pablo Federico, Carlos Vegh and Guillermo Vuletin discuss legal reserve requirements in an NBER working paper.

Their data set covers 15 industrial and 37 developing countries over the period 1970–2011. Developing countries typically actively manage legal reserve requirements in the sense of adjusting them at least once over the business cycle. Industrialised countries don’t. None of the latter has changed the requirements after 2004, and many have no requirements at all. Among the active countries, most conduct a counter cyclical reserve requirements policy, often in contrast to a more pro cyclical monetary policy along other dimensions.