Open AccessRaising Interest Rates: IOER vs. OMO: Interest On Excess Reserves Vs Open Market Operations
Author(s) -
William H. Carlson,
Conway Lackman
Publication year - 2017
Publication title -
international journal of financial research
Language(s) - English
Resource type - Journals
eISSN - 1923-4031
pISSN - 1923-4023
DOI - 10.5430/ijfr.v9n1p142
Subject(s) - excess reserves , open market operation , interest rate , monetary economics , idle , business , monetary policy , federal funds , raising (metalworking) , control (management) , recession , economics , government (linguistics) , repurchase agreement , finance , quantitative easing , central bank , macroeconomics , market liquidity , linguistics , philosophy , geometry , mathematics , management , computer science , operating system
We demonstrate that IOER should make the excess reserves even larger, continuing the problem of monetary policy control and rewarding the banks for their policy errors fostering the Great Recession by giving them risk free returns on the $2.5 trillion of idle funds that are benefiting no one except the banks themselves, or having the banks invest those idle funds in some useful manner such as helping finance the government deficit and fix our roads and bridges. The number 1 priority should be to get rid of the troublesome excess reserves and utilizing open market operations (OMO).