Reserve Supply Research Articles

Quantitative Easing and Excess Reserves

What are the impacts of a flush of interest-bearing excess reserves to the real economy? Surprisingly, the theoretical literature remains silent about this question. We address this issue in a new Keynesian model with various financial frictions and reserve requirements in the balance sheet of bankers. Modeling QE by the supply of excess reserves, allow for endogenous changes in the relative supply of financial assets. We find that this mechanism is crucial to identify and disentangle between the portfolio balance, the credit and the asset prices channels of QE. Further, we demonstrate that the macroeconomic effects of QE are rather weak and mainly transmitted through the asset prices channel.

Unconventional Monetary Policy and Funding Liquidity Risk

This paper investigates the efficiency of various monetary policy instruments to stabilize asset prices in a liquidity crisis. We propose a macro-finance model featuring both traditional and shadow banks subject to funding risk. When banks are well capitalized, they have access to money markets and efficiently mitigate funding shocks. When aggregate bank capital is low, a vicious cycle arises between declining asset prices and funding risks. The central bank can partially counter these dynamics. Increasing the supply of reserves reduces liquidity risk in the traditional banking sector, but fails to reach the shadow banking sector. When the shadow banking sector is large, as in the US in 2008, the central bank can further stabilize asset prices by directly purchasing illiquid securities.

Geoecology of small hydroelectric power stations on the rivers of the Moscow region, Russia

The aim of this paper is validation of possibility of using hydropower potential of local drops in water supply and water disposal systems of large enterprises and thermal power stations, reservoirs and other structures located on the territory of Moscow and Moscow Oblast; also there validated the possibility and feasibility of their hydropower potential use and consideration of geo-ecological factors such as geological setting and composition of soils on the territories of weirs, presence of forest vegetation, sorption characteristics and composition of soils significantly affecting the degree of protection of live streams against pollution. Therefore, they should be taken into consideration at conducting comprehensive assessment of the springs condition. Units of small HPPs may be installed at spillage of clarified water from sedimentation basins of thermal power stations, water purification facilities. Construction of small HPPs of such types should be realized within the frame of energy efficiency policy. Apart from incorporation of energy efficiency technologies they may contribute in power supply of enterprises at which they are constructed. Such stations may serve as a power supply reserve of certain consumers.

Can the U.S. Interbank Market be Revived?

Large-scale asset purchases by the Federal Reserve as well as new Basel III banking regulations have led to important changes in U.S. money markets. Most notably the interbank market has essentially disappeared with the dramatic increase in excess reserves held by banks. We build a model in the tradition of Poole (1968) to study whether interbank market activity can be revived if the supply of excess reserves is decreased sufficiently. We show that it may not be possible to revive the market to pre-crisis volumes due to costs associated with recent banking regulations. Although the volume of interbank trading may initially increase as excess reserves continue to decline, the new regulations may engender changes in market structure that result in interbank trading being completely replaced by non-bank lending to banks when excess reserves become scarce. This non-monotonic response of interbank trading volume to reductions in excess reserves may lead to misleading forecasts about future fed funds prices and quantities when/if the Fed begins to normalize their balance sheet by reducing excess reserves.

Money multiplier in the context of modern views on money creation: theory and facts

For a long period of time, multiple money expansion has been regarded empirically proven. Nevertheless, in recent decades it has been widely disputed, particularly in the publications of central banks and those of the BIS. In this paper we show that multiple money expansion is characteristic of underdeveloped financial systems. In the era of multiple money expansion the volume of lending was limited by the supply of bank reserves. Today, however, the main constraint is the demand for credit. This is supported by our analysis of banks’ balance sheets as well as VAR analysis of factors of bank lending in Russia in 2005—2017.

Permit market auctions with allowance reserves

This article investigates multi-unit uniform-price auctions with allowance reserves, where a fixed quantity of units is supplemented by an additional supply reserve. The reserve automatically releases units if a sufficiently high price is triggered. This mechanism is commonly used in pollution permit auctions. The main justification for implementing an allowance reserve is to assist in cost containment. We show—paradoxically—that incorporating an allowance reserve into a permit auction may increase the clearing price. This has implications for all major cap-and-trade markets, including the US Regional Greenhouse Gas Initiative.

Effects of Market Reform on Facility Investment in Electric Power Industry: Panel Data Analysis of 27 Countries

In this study, we analyzed the effects of electricity market reform on investment in generation facilities. We used the data of 27 OECD member countries and considered ownership structure, horizontal and vertical unbundling, change of transaction method, and government regulation as explanatory variables for market reform. We used four regression models, in which we examined the effects of market reform on the capacity of generation facilities, supply reserve ratio, total investment, and base-load share, respectively. For each panel regression model, we performed a Hausman test to identify the model between random effect and fixed effect. Based on the estimation results, we found that electricity market reform has a negative effect on generation facilities in most countries. Both privatization and regulation have negative impacts on the generation facility and base-load share. On the other hand, the level of liberalization of transactions have positive effects on the generation facility, supply reserve ratio, and base-load share. The empirical analysis also showed that horizontal unbundling does not have a meaningful effect on investment, but vertical unbundling contributes to increasing the supply reserve ratio.

Explaining the appearance of open-mouth operations in the 1990s U.S.

In the 1990s it became apparent that changes in the FOMC’s target rate could be implemented through announcements alone – “open mouth operations” – without adjustments to reserve supply or the discount rate. This cannot be explained by standard models of the Fed’s system of policy implementation at the time. It differed from experience in the 1970s, the earlier era of interest-rate targeting, though the structure of implementation appeared essentially similar. I explain the appearance of open-mouth operations as a consequence of longstanding Fed discount-window lending practices, interacting with a decrease after the 1970s in the relative importance of discount borrowing by small banks. Data on discount borrowing by large versus small banks in the 1980s–1990s and the 1970s support my explanation. Thanks to James Clouse, Selva Demiralp, Cheryl Edwards, William English, Marvin Goodfriend, Kenneth Kuttner and William Whitesell.

PERAN KEWIRAUSAHAAN BERBASIS DIGITAL DALAM MENGURANGI TINGKAT PENGANGGURAN

Entrepreneurial creation becomes an alternative solution to various problems in society such as poverty and social inequality, increasing unemployment of productive age and depletion of energy supply reserves, all of which require creative and innovative action. Entrepreneurship is people who are able to turn an opportunity into a business that produces, which is processed through creativity, innovation and uniqueness in making a product and dare to take all possible risks that accompany it and not make it easy to despair if it fails to build the business. It was concluded that entrepreneurship also participated in the development of the State, digital-based entrepreneurship made use of increasingly sophisticated technology, digital-based entrepreneurship as a solution to reduce the unemployment rate, the number of unemployment in indonesia, entrepreneurship is something that must be instilled by the youth and the people of indonesia.

“Unconventional” Monetary Policy as Conventional Monetary Policy: A Perspective from the U.S. in the 1920s

To implement monetary policy in the 1920s, the Federal Reserve utilized administered interest rates and conducted open market operations in both government securities and private money market securities, sometimes in fairly considerable amounts. We show how the Fed was able to effectively use these tools to influence conditions in money markets, even those in which it was not an active participant. Moreover, our results suggest that the transmission of monetary policy to money markets occurred not just through changing the supply of reserves but importantly through financial market arbitrage and the rebalancing of investor portfolios. The tools used in the 1920s by the Federal Reserve resemble the extraordinary monetary policy tools used by central banks recently and provide further evidence on their effectiveness even in ordinary times.

Research on Coordination and Optimization Model of Emergency Supplies for Manufacturing Accidents Based on Scenario Analysis

Enterprises should fully mobilize and utilize the resources independent of the enterprises to deal with the frequent accidents and meet the emergency supplies need. This paper analyzes the reserve coordination patterns of enterprise’s reserves combined with production capability reserves, to optimize, coordinate and meet the emergency supplies need under multisite manufacture accidents scenarios. And to reduce the enterprise's emergency reserve cost and maintain its daily emergency rescue ability. The effectiveness of the model is then verified by an example of emergency supply reserve of oil tank fire. This paper provides the necessary theoretical support for the enterprise emergency material reserve system.

Allocative Inefficiency of Special Drawing Rights (SDRs): Issues and Challenges of International Political Economy

When the global monetary system faced the problem of inadequate supply of gold reserves, it led to the emergence of new paper gold in the form of Special Drawing Rights (SDRs). SDRs are used by member nations of IMF for a wide variety of transactions on IMF’s Operations Division and Administered Accounts in proportion to their quotas. Lately, the IMF has been subjected to extensive criticism on issues of recent allocation of SDRs and the related weighted voting rights. At present, the SDRs measurement is based on weighted average and a significant size of SDRs quota is allocated to developed countries due to their higher weight ratio. The SDRs quota allocated to developing and least developed countries is insufficient because they possess low weight ratio and low value. Further, the IMF does not follow the universal membership in which one country get one vote right; these allocated SDRs reflect the voting power of member nations. If a few countries with high SDRs collude with one another, it can lead to a decision favouring these countries due to a high percentage of voting rights with them. This could also result in these countries having their own representatives in the highest decision-making body, i.e. Board of Governors. This paper argues that the method of quota allocation needs to be reworked for better allocative efficiency purpose, to achieve a progressive and inclusive international economic order.

A Model of the Federal Funds Market: Yesterday, Today, and Tomorrow

The landscape of the federal funds market changed drastically in the wake of the Great Recession as large-scale asset purchase programs left depository institutions awash with reserves, and new regulations made it more costly for these institutions to lend. As traditional levers for implementing monetary policy became less effective, the Federal Reserve introduced new tools to implement the target range for the federal funds rate, changing this landscape even more. In this paper, we develop a model that is capable of reproducing the main features of the federal funds market, as observed before and after 2008, in a single, unified framework. We use this model to quantitatively evaluate the evolution of interest rates and trading volume in the federal funds market as the supply of aggregate reserves shrinks. We find that these outcomes are highly sensitive to the dynamics of the distribution of reserves across banks.

Optimal Operation for Integrated Residential Distributed Energy Resources Considering Internal Reserve

In recent years, an increasing number of distributed energy resources (DERs) in residential sector began to have an impact on electrical system operation. Especially, through massive introduction of photovoltaic power generation like rooftop solar, it became difficult to balance supply and demand of electricity in some area of Japan. To deal with this problem, this paper proposes integrated system of residential DERs which secure the supply reserve internally. Mixed Integer Linear Programming (MILP) model of integrated system is developed, and verified by case studies. The results of case study shows that the operation which secures internal reserve of 20% of PV generation can be performed by about 2% increase of the total cost.

Commodity price volatility with endogenous natural resources

Natural resource reserves are exogenous in models of small commodity exporters. Changes in the stock of reserves play no role in the macroeconomy including in business cycle volatility, trade dynamics or exchange rate volatility. We consider richer supply dynamics and model exploration and depletion. We show that an endogenous supply of reserves is important for capturing the stylised facts associated with commodity price shocks including a commodity currency, the crowding-out of non-commodity activity (Dutch-Disease) and a volatile business cycle.We also consider how exploration and depletion affect the ranking of optimal monetary and taxation policies. When natural resource reserves are held fixed, monetary policy is an efficient tool for stabilising the effects of commodity price shocks. However, when exploration and depletion are accounted for, using interest rates to stabilise the effects of commodity price changes becomes inefficient. Using taxes on the resource sector, specifically an ad valorem royalty, remains efficient.

Effects of solar photovoltaic technology on the environment in China.

Among the various types of renewable energy, solar photovoltaic has elicited the most attention because of its low pollution, abundant reserve, and endless supply. Solar photovoltaic technology generates both positive and negative effects on the environment. The environmental loss of 0.00666yuan/kWh from solar photovoltaic technology is lower than that from coal-fired power generation (0.05216yuan/kWh). The negative effects of solar photovoltaic system production include wastewater and waste gas pollutions, the representatives of which contain fluorine, chromium with wastewater and hydrogen fluoride, and silicon tetrachloride gas. Solar panels are also a source of light pollution. Improper disposal of solar cells that have reached the end of their service life harms the environment through the stench they produce and the damage they cause to the soil. So, the positive and negative effects of green energy photovoltaic power generation technology on the environment should be considered.

Analysis of Microgrid Contributing to Hour-ahead market operation through Marginal Day-ahead market Price-Based Demand Response

Abstract: In Japan, 53 GW Photovoltaic (PV) systems will be introduced in future electric power system in 2030 year. It will raise issues of insufficient supply capability and reserve capacity to utility operator to ensure supply-demand balance. On the other hand, Microgrid that located in demand side will be expecting to actively response the incentive signal sent by the utility operator so as to contributing to demand-supply adjustment. In this paper, based on revised IEEJ-EAST-10 Generators simulation model that included of 22GW PV generations and 5GW Microgrids, we analyzed the effect and potential contribution capability of microgrid to electric power system demand-supply adjustment in hour-ahead electricity market through Price-Based Demand Response. Firstly, we analyzed the impact of day-ahead market marginal price on optimal scheduling of Micorgrid. Secondly, we analyzed the impact of optimal scheduling of Micorgrid on Utility operator in Hour-ahead market operation. Lastly, we evaluated the contribution capability of microgrid to electric power system demand-supply adjustment in hour-ahead electricity market that included the improvement of partial-load operation of coal thermal power plant, Utility side load-leveling, and reserve capacity provided by Microgrid.

Assessing forest sustainability trajectory with temporal changes in timber output and ecological reserve: the case of China

We classified forest resources into four modes: high timber output and high ecological reserve (Mode T-E); high timber output and low ecological reserve (Mode T-e); low timber output and low ecological reserve (Mode t-e); and low timber output and high ecological reserve (Mode t-E). Ecological reserve is stand volume per unit area of natural forests and total area of natural forests; timber output is defined as total area of timber forests and unit area of timber production. We used this classification system to examine forest development in China between 1950 and 2013. Data were acquired mainly from forest inventory statistics published by China’s Forestry Administration between the 1970s and 2013. I Information from the 1950s was acquired from relevant literature. Our analysis suggests that China’s forest resources transitioned from Mode t-E to Mode T-e during the period between the early 1950s and late 1970s, resulting in the destruction of both ecological vigor and timber resources. During the following 20 years, strategies were implemented to improve the ecological reserve and increase timber supply, resulting in a decline in the rate of forest degradation. Over the past decade, China’s forest resources have reached Mode T-E as a result of improvements in both the ecological reserve and the timber supply. Currently, the total area of timber forests is relatively low, representing the limiting factor for improvement in overall forest functionality. Nevertheless, along with increased efforts to protect natural forests and develop fast-growing forest plantations, it is hopeful that China’s forest resources will achieve a sustainable state. The four-mode TOER (timber output, ecological reserve) method introduced in this paper is a simple but an effective approach for characterizing the overall quality and quantity of forest resources. The data used for this type of evaluation are typically easy to obtain and reliable. This methodology has potential to be applied to forests in various regions and countries.

Evaluating the role of electricity storage by considering short-term operation in long-term planning

Abstract Short-term operating requirements and constraints in power systems are becoming increasingly important with the greater flexibility needed due to the integration of variable renewables. However, large problem sizes and computational barriers have limited the extent to which they are included in long-term planning models. Our objective is to understand the role of electricity storage in future renewable-based systems by including an accurate representation of short-term operation with high temporal detail within a long-term planning framework. Specifically, we discuss the development of a long-term investment model including a continuous relaxation of the technology-clustered formulation of the short-term unit commitment problem, including detailed operating reserve sizing and supply. This model is solved for a full year, and is applied to a test system with system load and renewable generation characteristics from the Belgian power system in a greenfield setting, i.e., assuming no pre-existing capacities, to analyze the role of storage at different renewable penetration levels. Both pumped-hydro storage and battery energy storage is considered, and their role in providing energy services and frequency control is investigated. We derive broadly applicable conclusions on the benefits and role of electricity storage to motivate why it may be built and operated. Results show that, in general, the integration of storage resources decreases total system cost, partially replaces flexible power plants, facilitates the integration of renewable energy sources, and allows inflexible technologies to perform better.

Bank Lending Channel in Transmission of Monetary Policy in Japan, 2000–2012: The Sign Restrictions VAR Approach

This paper investigates empirically whether the bank lending channel of monetary policy existed in Japan from 2000 to 2012. We employ the sign restrictions VAR approach to deal with the identification problem. In particular, we focus on the differential effects of a quantitative easing monetary policy regardless of bank (City banks vs. Regional banks) and firm (all enterprises vs. small and medium-sized enterprises－SMEs) size. Our impulse response function analyses show that following a quantitative easing monetary policy shock, the lending of Regional banks increases more than that of City banks, and the bank lending rate of Regional banks declines in a larger magnitude. Moreover, the responses of output to reserve supply are larger in Regional banks than that in City banks. Our variance decomposition analyses show that a larger proportion of the forecast error variance in the bank lending of Regional banks relative to City banks, and a larger proportion of the forecast error variance in the bank lending to SMEs relative to all firms can be explained by monetary policy shock. Similarly, the loans of Regional banks have a larger impact on output than the loans of City banks, and the loans to SMEs have a larger impact on output than the loans to all firms. Moreover, output is more affected by the reserve supply to Regional banks than to City banks. These results together indicate that a quantitative easing policy has a greater impact on the real economy through the lending of Regional banks.