Banks' demand for excess reserves

Abstract

Given the institutional arrangements in the United states, the money supply is determined jointly by the actions of the monetary authorities, the commercial banks, and the public. The public's demand for currency and time deposits relative to demand deposits and the banks' demand for excess reserves and borrowings from the Federal Reserve banks can have, and at times have 'had, a significant affect on the money supply. Consequently, knowledge about these demand functions is a prerequisite for a complete understanding of the money supply mechanism. The purpose of this dissertation is to try to increase our understanding of one of these demand functions, the banks' demand for excess reserves.