Impact of the Payment of Interest on Demand Deposits: A Study of the Staff of the Board of Governors of the Federal Reserve System
This paper, prepared by Stephen H. Axilrod, Staff Director for Monetary Policy, in collaboration with members of the Board's Division of Research and Statistics, evaluates the probably effects of lifting the prohibition on payment of interest on demand deposits, which had been in effect since 1933. The effects on banks, other depository institutions, and the public, as well as on monetary policy and credit markets as a whole, are discussed. The study suggests that the most significant potential problem lies in the transitional adjustments of banks and other institutions to the new competitive environment; possible mitigation techniques are discussed.
Board of Governors of the Federal Reserve System (U.S.) and Axilrod, S. H., ([year]), Impact of the Payment of Interest on Demand Deposits: A Study of the Staff of the Board of Governors of the Federal Reserve System, [issue title/date], accessed Sep 1, 2014 from FRASER, http://fraser.stlouisfed.org/publication/?pid=265