During the first half of the 1960s the U.S. Treasury conducted eleven advanced refundings. Publicly held Treasury securities aggregating $188, 631 million were made eligible for exchange and $62, 642 million were exchanged — an aggregate exchange ratio of 33 percent.

I. Recent literature, 97.—II. The business of banking and the adjustment gap, 99.—III. The model, 101.—IV. Empirical results, 109.—V. Conclusions, 117.

Most dynamic theories of the monetary policy mechanism, and reserve position doctrine in particular, specify a homogeneous banking system response to monetary policy actions. This article argues that the micro models of bank behavior implicit in these monetary theories remain untested and perhaps misspecified. An experimental model of a single bank's weekly balance sheet adjustments is specified and estimated with the purpose of improving the micro foundations of the theory of monetary dynamics.