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Implications of Balance of Payments Deficits for Bank Liquidity

Published online by Cambridge University Press:  19 October 2009

Howard E. Mitchell
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Extract

Today great emphasis is being placed upon the need to maintain adequate supplies of money in the economy in the face of continuing balance of payments deficits. This emphasis reflects a desire to assure a. continuous high level of economic activity and low unemployment rates.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 1 , Issue 1 , March 1966 , pp. 56 - 75
Copyright
Copyright © School of Business Administration, University of Washington 1966

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References

1 Nadler, Marcus discusses the conditions prerequisite to using debentures in “Time Deposits and Debentures: The New Sources of Bank Funds,” The Bulletin No. 30 (July 1964), pp. 18–19.Google Scholar

2 All figures used are for December of the indicated year, and are taken from the Federal Reserve Bulletin.

3 Marcus Nadler indicates that certificates of deposit might provide a replacement source for secondary reserves for an individual bank. This is accomplished, however, at the expense of other banks and could not increase system reserves. At the present time, few banks could supply these without pain. Since they are liabilities of the bank and not assets, additional system reserves would have to come from central bank operations. Op. cit., pp. 16–17.

4 Hansen, Alvin H., Business Cycles and National Income (New York: W. W. Norton & Company, Inc., 1951) pp. 133 ff.Google Scholar