Ample Reserves and Deposit Pass-Through

Abstract. This paper studies how the euro area transition from a scarce-reserves operating framework to an ample-reserves regime with fixed-rate full allotment changed the pass-through from policy rates to household current account rates. Using IV local projections identified with high-frequency monetary policy surprises, I show that deposit-rate pass-through is low, substantially weaker in the ample-reserves era than in the pre-2008 scarce-reserves regime, and decreasing in country-level reserve abundance. To interpret these facts, I develop a parsimonious bank model in which deposit pricing depends on the expected marginal cost of non-deposit funding. The funding block combines Poole-style stochastic reserve shortfalls with collateralized policy-rate borrowing. Under ample reserves, shortfall risk is negligible and pass-through is governed by deposit-market primitives. Under scarce reserves, reserve shortfalls may exhaust eligible collateral capacity and force the bank into more expensive residual funding, generating stronger deposit-rate pass-through. Next steps are to test the mechanism with bank-level ECB IMIR/IBSI data and to embed the pricing block in a richer dynamic general-equilibrium model with bank intermediation.