The Repo Auctions of the European Central Bank and the Vanishing Quota Puzzle
AbstractUntil June 2000 the European Central Bank (ECB) used fixed rate tenders for its weekly repo auctions. A switch to variable rate tenders became necessary due to massive overbidding by banks. In this paper we introduce a stylized game among banks to investigate this overbidding phenomenon. Our results confirm the weakness of the fixed rate tender format and indicate that the ECB's liquidity management has significantly improved since the switch to the variable rate system. Yet recent episodes of rate cut expectations suggest that the ECB's practice of setting a minimum bid rate should be abandoned in favor of a more symmetric interest rate target. Copyright The editors of the "Scandinavian Journal of Economics", 2003 .
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal The Scandinavian Journal of Economics.
Volume (Year): 105 (2003)
Issue (Month): 2 (06)
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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442
Other versions of this item:
- Nautz, Dieter & Oechssler, Jörg, 1999. "The repo auctions of the European Central Bank and the vanishing quota puzzle," SFB 373 Discussion Papers 1999,79, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Dieter Nautz & Jörg Oechssler, 2001. "The Repo Auctions of the European Central Bank and the Vanishing Quota Puzzle," Bonn Econ Discussion Papers bgse9_2001, University of Bonn, Germany.
- E25 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
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