Search

We examine whether firms' tax uncertainty affect their trade credit and inventory investment policies. Using a measure of tax uncertainty based on an accounting reserve for contingent tax liability, we find that tax uncertainty is negatively associated with trade credit use and inventory investment. In terms of economic significance, the effect of tax uncertainty on trade credit use is comparable to those of the firm's cash flow and leverage. Overall, our findings highlight a new channel through which tax planning policies affect corporate decisions and show that the firm's tax planning policies are important determinants of its trade credit use and inventory investment. Our results are robust to different empirical specifications and tests. [ABSTRACT FROM AUTHOR]

The Federal Reserve has recently activated its newly acquired powers to pay interest on reserves of depository institutions. The Fed maintains that its new policy increases economic efficiency and intends it to play a lead role in the exit from quantitative easing. This paper argues it is a bad policy that has a deflationary bias; is costly to taxpayers, and that cost will increase as normal conditions return; and establishes institutional lock-in that obstructs desirable changes to regulatory policy. The paper recommends repealing the Fed's power to pay interest on bank reserves. Second, the Fed should repeal regulation Q, which prohibits payment of interest on demand deposits. Third, the Fed should immediately implement an alternative system of asset-based reserve requirements (liquidity ratios) that will improve monetary control and can help exit quantitative easing at no cost to the public purse. Now is the optimal time for this change. [ABSTRACT FROM AUTHOR]

Through a mathematical programming setup, reserve accounting is shown to be auxiliary to accomplishing monetary policy operating objectives. This article outlines a theoretical way of comparing the potency of open market operations under different reserve accounting procedures. It is shown that if the interest sensitivity of reservable liabilities is greater than the interest sensitivity of reserves, then lagged reserve accounting makes Federal Reserve open market purchases and ‘sells’ of securities more powerful in affecting the federal funds rate. [ABSTRACT FROM AUTHOR]

Investigates the doubling of reserve requirements between August 1936 and May 1937 of the Federal Reserve in the U.S. Effect on the increase of reserve ratio on bank lending; Need of additional capital on banks; Increase of business loans.

This paper seeks to explore the possible long-run causal connection between the excess US bank reserves and the short-term interest rate differentials (differences between the federal funds rates and discount rates) within the well-known bivariate cointegration framework. It uses monthly data from February 1984 through March 1992. Each time series is nonstationary and reveals I (1) behaviour. There is evidence of a long-run equilibrium relation between the two variables. The estimates of the error-correction models reveal a unidirectional long-run causality flowing from the short-term interest rate differentials to the excess US bank reserves. [ABSTRACT FROM AUTHOR]

En a series of papers, Taylor (1971, 1977, 1979) has proposed a theoretical model of Credit Union behavior emphasizing their non-profit and cooperative nature. Taylor (1979) represents the model in its most developed form. In this note his work is surveyed and a modification is proposed, namely the incorporation of current period endogenous reserve accumulation, which is very important in practice and which, it is suggested, fills a significant gap and makes his model more satisfactory as a representation of credit union behaviour in periods of asset growth or decline. [ABSTRACT FROM AUTHOR]

There is a significant view being expressed lately, fortunately to date a minority opinion, that federal government deficits do not matter much. Or in any event, there is no urgency in coming to grips with them. In fact, deficits do matter. Over the long term, they have a corrosive effect on the economy, and it is from this perspective that the case for bringing down the deficit is compelling. More important, the long run is rapidly turning into the short run. If one does not act promptly, the imbalances in the economy are such that the effects of the deficit will be increasingly felt and with some immediacy. The effects of the federal budget deficits over the past several years have been muted by two circumstances, both of which are currently changing rapidly. One was the rather large degree of slack in the economy in the early years of the current expansion. This slack meant that the economy could accommodate growing demands from both the private and public sectors. In addition, to the extent that these demands could not be accommodated from U.S. resources, the industrialists went abroad and imported them. This can be seen in our large trade and current-account deficits.

Looks at the contemporaneous reserve accounting (CRA) of the Federal Reserve System aimed to strengthen the relationship between reserve growth and money growth in the U.S. Recognition of the joint influence of the Federal Reserve, the banks and the public; Procyclical gyrations in reserve growth; Advantages of CRA over lagged reserve accounting; Adoption of short and long-term variable-rate financial instruments.

This article presents views of several economics experts on the need to reform the international monetary system in the U.S. Several problems associated with the monetary system are explained. The financial role of the U.S. within the world economy has been essential in achieving international economic growth and trade liberalization. The functions served by the outflow of U.S. capital and aid are described. The total net reserves of the U.S. and Great Britain was about $17 billion. A difference existing between reserve assets and an international reserve asset is highlighted.