Dale W. Hendersonl and Douglas G. Waldo
In this paper a two-country model of international financial markets is employed to analyze some implications of placing reserve requirements on Eurocurrency deposits. The features of this model are described in section 1. Many earlier analyses of the Eurocurrency markets focused on the Eurodeposit multiplier, the response of equilibrium holdings of Eurodeposits to an autonomous shift from domestic deposits into Eurodeposits.1 The analysis in the second section is a continuation of
The model employed in this paper is a substantially modified version of one developed by Henderson and Lance Girton, which is discussed briefly in Dale W. Henderson , "Eurodollars, Petrodollars, and World Liquidity and Inflation: A Comment", in Karl Brunner and Allan H. Meltzer, eds., Stabilization of the Domestic and International Economy, Carnegie-Rochester Conference Series on Public Policy, vol. 5 ( Amsterdam: North-Holland Publishing Company, 1977), pp. 311-318. The authors have benefited greatly from discussions of many of the issues considered in this paper with Stephen Axilrod, Michael Dooley, Richard Froyen, Lance Girton, Don Roper, Jeffrey Shafer, and Roger Waud. Helpful suggestions were received from Peter Clark, Walter Enders, Pentti Kouri, Harvey Lapan, Thomas Pugel, and Clas Wihlborg. This paper represents the views of the authors and should not be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System or other members of its staff.