http://www.eastasiaforum.org/2008/07/15/instruments-of-monetary-policy/ Economics, Politics and Public Policy in East Asia and the Pacific Sun, 12 Feb 2012 19:28:35 +0000 hourly 1 http://wordpress.org/?v=3.2 http://www.eastasiaforum.org/2008/07/15/instruments-of-monetary-policy/comment-page-1/#comment-505 Ross McLeod Tue, 15 Jul 2008 05:38:23 +0000 http://eastasiaforum.wordpress.com/?p=179#comment-505 Actually, there’s another reason why increasing the reserve ratio would be attractive to BI: reserves don’t usually attract interest, so BI’s profitability would be enhanced as a result of forcing banks to lend more to itself at zero cost. Since its balance sheet currently contains a huge volume of foreign exchange assets financed by much higher cost SBIs, this is presumably an attractive option. Actually, there’s another reason why increasing the reserve ratio would be attractive to BI: reserves don’t usually attract interest, so BI’s profitability would be enhanced as a result of forcing banks to lend more to itself at zero cost. Since its balance sheet currently contains a huge volume of foreign exchange assets financed by much higher cost SBIs, this is presumably an attractive option.

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