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There are two benefits to reserve requirements.
China increased reserve requirements for banks.
Many have dispensed with reserve requirements altogether.
Russia injected money into its banks and lowered reserve requirements.
It has cut rates and reserve requirements a bit.
Lower reserve requirements effectively free up more lending by banks.
Ideally, the asset-based reserve requirements would have to be placed on the whole financial system.
The latest tightening takes the form of higher reserve requirements for banks.
Palley's ingenious idea is that central banks place reserve requirements on the holdings of assets.
And they say his loosening of bank reserve requirements risks destabilizing the banking system.
"We can expect steady increases in interest rates and the reserve requirements".
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