This can be attributed to the fact that banks, rather than employing such additional liquidity pumped by the Federal Reserve into the system, have preferred to keep these funds as excess reserves with the Fed itself: banks deposits with the Federal Reserve jumped from around US $ 90 billion to US $ 839 billion between June and December 2008.
Thus, all the efforts of the Fed to accelerate the pace of credit and monetary aggregates in the US economy have been largely offset by the increased holdings of commercial bank deposits with the Fed. As noted earlier, the strong growth in monetary base holds the potential to increase capital flows to the EMEs with lags.