Federal Reserve Tools for Managing Rates and Reserves
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Wed 20 May 26
13:00 - 14:15
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Online
Zoom (please email Dr Mehmet Furkan Karaca for the link)
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Event speaker
Professor David Skeie, Warwick Business School
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Event type
Lectures, talks and seminars
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Event organiser
Essex Finance Centre
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Contact details
Dr Mehmet Furkan Karaca m.f.karaca@essex.ac.uk
The Essex Finance Centre (EFiC) warmly invites you to join the research seminar with Professor David Skeie from Warwick Business School, University of Warwick.
The Federal Reserve and other central banks are reducing the size of their balance sheets after periods of extraordinary quantitative easing, but the new normal supply of reserves is not yet established.
We analyse the impact of reserves in a model of bank liquidity and balance sheet costs. We find that the optimal supply of reserves is achieved when equilibrium bank deposit rates equal the interest rate on reserves, which is consistent with an ample supply of reserves. This quantity of reserves equates banks’ marginal liquidity costs and balance sheet costs. We also find that raising the Fed’s overnight reverse repo rate up to the rate on reserves would implement the optimal supply of reserves. Empirical analysis supports our model and provides insight on the role that short-term Treasury securities play along with reserves in the determination of bank borrowing rates.
Speaker
David Skeie is Professor of Finance at Warwick Business School and the Gillmore Centre for Financial Technology based at Warwick University. He is also a member of the Bank of England and HM Treasury Academic Advisory Group on Central Bank Digital Currency. David was previously a Senior Economist at the Federal Reserve Bank of New York and an Assistant Professor of Finance and Mays Research Fellow at Texas A&M Mays Business School. He has held additional appointments as a Visiting Researcher at Imperial College Business School, Adjunct Assistant Professor of Finance at NYU Stern School of Business, and visiting Senior Economist at the Federal Reserve Board of Governors.
Formerly, David was a securities trader at the hedge fund Citadel Investment Group and a senior associate at the financial risk management consulting firm Capital Market Risk Advisors. David's research has been published in leading academic finance and economics journals. His research fields include financial intermediation, financial crises, interbank markets, fintech, contract theory, and corporate finance.
