The market valuation effects of reserve regulation

Myron B. Slovin, Marie Sushka, Yvette M. Bendeck

Research output: Contribution to journalArticlepeer-review

13 Scopus citations


We demonstrate that the financial market's reaction to changes in reserve regulation implies that reserve requirements are an excise tax on banking activities. Changes in reserve requirements do not influence yields on Treasury securities or returns on broad-based portfolios of nonfinancial stocks and thus do not impound new information about monetary policy. Moreover, changes in reserve requirements have an impact on nonbank financial firms that is opposite in sign to that of banks. This suggests that reserve requirements shift the locus of some financial activities from the banking sector to the nonbank sector of the financial system.

Original languageEnglish (US)
Pages (from-to)3-19
Number of pages17
JournalJournal of Monetary Economics
Issue number1
StatePublished - Jan 1990

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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