Abstract
The paper examines the impact from liquidity reserves on banks' lending. Analysing a large sample of US
banks, we discover that the lending of our firms is lower when they hoard liquidity in the form of cash, inter-bank deposits, or through transactions on federal funds. Further results reveal that the effect is stronger after the last quarter of 2008, namely after that the Federal Reserve started to pay interests on banks' reserves. The paper contributes to the discussion around the implications on the credit to the real economy from central banks' interventions of monetary policy and in particular from the discipline of reserves.