The Use of Reserve Requirements in an Optimal Monetary Policy Framework

Number: 
716i
Published: 
Classification JEL: 
E51, E52, E58
Keywords: 
Human capital agglomeration, Social returns, Private returns, Externalities, Uncertainty, Fiscal policy

We analyse three models to determine the conditions under which reserve requirements are used as a part of an optimal monetary policy framework in an inflation targeting regime. In all cases the Central Bank (CB) minimizes an objective function that depen