Quarterly Journal of Economics Vol. 140 No. 1 2025

Reserves Were Not So Ample After All

Adam Copeland¹; Darrell Duffie²; Yilin Yang³

¹ Federal Reserve Bank of New York · ² Stanford Graduate School of Business · ³ City University of Hong Kong

Abstract

We show that the likelihood of a liquidity crunch in wholesale U.S. dollar funding markets depends on levels of reserve balances at the financial institutions that are the most active intermediaries of these markets. Heightened risk of an imminent liquidity crunch is signaled by significant delays in intraday payments to these large financial institutions over the prior two weeks. Our study contributes to the broader dialogue surrounding the Federal Reserve’s ongoing quantitative tightening.

DOI

10.1093/qje/qjae034

Volume

140

Issue

1

Pages

239-281

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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