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Why did the banks overbid? An empirical model of the fixed rate tenders of the European Central Bank

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  • Ayuso, Juan
  • Repullo, Rafael

Abstract

This paper tests two hypotheses for the overbidding behavior of the banks in the fixed rate tenders conducted by the European Central Bank from January 1999 until June 2000. One hypothesis attributes the overbidding to expectations of a future tightening of monetary policy, while the other attributes it to the liquidity allotment decisions of the ECB.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 20 (2001)
Issue (Month): 6 (November)
Pages: 857-870

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Handle: RePEc:eee:jimfin:v:20:y:2001:i:6:p:857-870

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Web page: http://www.elsevier.com/locate/inca/30443

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References

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  1. Campbell, John Y, 1987. "Money Announcements, the Demand for Bank Reserves, and the Behavior of the Federal Funds Rate within the Statement Week," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(1), pages 56-67, February.
  2. 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.
  3. Hamilton, James D, 1996. "The Daily Market for Federal Funds," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 26-56, February.
  4. Juan Ayuso & Rafael Repullo, 2000. "A Model of the Open Market Operations of the European Central Bank," Banco de Espa�a Working Papers 0016, Banco de Espa�a.
  5. Breitung, Jorg & Nautz, Dieter, 2001. "The empirical performance of the ECB's repo auctions: evidence from aggregated and individual bidding data," Journal of International Money and Finance, Elsevier, vol. 20(6), pages 839-856, November.
  6. repec:wop:humbsf:1999-79 is not listed on IDEAS
  7. Juan Ayuso & Rafael Repullo, 2000. "A Model of the Open Market Operations of the European Central Bank," Banco de Espa�a Working Papers 0016, Banco de Espa�a.
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Citations

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Cited by:
  1. Pijoan-Mas, Josep, 2005. "Precautionary Savings or Working Longer Hours?," CEPR Discussion Papers 5322, C.E.P.R. Discussion Papers.
  2. Ewerhart, Christian & Cassola, Nuno & Valla, Natacha, 2005. "Equilibrium and inefficiency in fixed rate tenders," Working Paper Series 0554, European Central Bank.
  3. Leonardo Bartolini & Alessandro Prati, 2003. "The execution of monetary policy: a tale of two central banks," Economic Policy, CEPR & CES & MSH, vol. 18(37), pages 435-467, October.
  4. Jürgen Wiemers & Ulrike Neyer, 2003. "Why do we have an interbank money market?," IWH Discussion Papers 182, Halle Institute for Economic Research.
  5. Gabriel Pérez Quirós & Hugo Rodríguez Mendizábal, 2009. "Asymmetric Standing Facilities: An Unexploited Monetary Policy Tool," UFAE and IAE Working Papers 795.09, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  6. Nautz, Dieter & Linzert, Tobias & Breitung, Jörg, 2003. "Bidder Behavior in Repo Auctions without Minimum Bid Rate: Evidence from the Bundesbank," Discussion Paper Series 1: Economic Studies 2003,13, Deutsche Bundesbank, Research Centre.
  7. Ulrike Neyer & Jürgen Wiemers, 2004. "The Influence of a Heterogeneous Banking Sector on the Interbank Market Rate in the Euro Area," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 140(III), pages 395-428, September.
  8. Giuseppe Bruno & Ernesto Maurizio Ordine & Antonio Scalia, 2005. "BanksÂ’ participation in the Eurosystem auctions and money market integration," Temi di discussione (Economic working papers) 562, Bank of Italy, Economic Research and International Relations Area.
  9. Bindseil, Ulrich, 2002. "Equilibrium bidding in the Eurosystem's open market operations," Working Paper Series 0137, European Central Bank.
  10. Ewerhart, Christian & Cassola, Nuno & Valla, Natacha, 2012. "Overbidding in fixed rate tenders: The role of exposure risk," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 539-549.
  11. Linzert, Tobias & Nautz, Dieter & Breitung, Jorg, 2006. "Bidder behavior in central bank repo auctions: Evidence from the Bundesbank," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(3), pages 215-230, July.
  12. Würtz, Flemming Reinhardt, 2003. "A comprehensive model on the euro overnight rate," Working Paper Series 0207, European Central Bank.
  13. Linzert, Tobias & Nautz, Dieter & Bindseil, Ulrich, 2007. "Bidding behavior in the longer term refinancing operations of the European Central Bank: Evidence from a panel sample selection model," Journal of Banking & Finance, Elsevier, vol. 31(5), pages 1521-1543, May.
  14. Linzert, Tobias & Nautz, Dieter & Bindseil, Ulrich, 2004. "The longer term refinancing operations of the ECB," Working Paper Series 0359, European Central Bank.
  15. Bucher, Monika & Hauck, Achim & Neyer, Ulrike, 2014. "Frictions in the interbank market and uncertain liquidity needs: Implications for monetary policy implementation," DICE Discussion Papers 134, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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