Is Deposit Rate Deregulation an Rx for M1?
Last Updated: 09/10/85
Since the Banking Act of 1933, U.S. commercial banks have been prohibited from paying explicit interest on demand deposits. Over time, however, there has been a gradual erosion of the spirit, if not the word, of this legislation. For example, in the 1970s, the rapid growth in money market mutual fund assets and overnight repurchase agreements could be attributed to the fact that these financial instruments possess transactions characteristics as well as market rates of return.