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The Eurosystem operational framework, use of colleteral and liquidity distribution in the euro area: towards a single interbank market?

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  • Gianfranco A. Vento

    ()
    (Università degli Studi di Roma "La Sapienza", Facoltà di Economia, Roma (Italy))

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    Abstract

    This paper analyses the current operational framework chosen to implement singlemonetary policy in the euro area, pointing out the effects of certain technical choices in the field of monetary policy instruments on the interbank market and bank treasuries. In particular, I examine how the tender typology adopted for main refinancing operations affects overbidding and underbidding, as well as efficiency in bank liquidity management. I then go on to analyse the technical features of unsecured interbank markets in the euro area in order to determine whether a screen-based framework leads to more efficient liquidity management than achieved in over-the-counter markets. In accordance with the averaging provision mechanism, minimum reserves during the maintenance period in Italy, where the interbankmarket is electronic-based, are taken as indicators of efficiency in this market. On the evidence of the data, it seems that Italian banks can reduce the opportunity cost of maintaining minimum reserves, also performing intertemporal arbitrages between theinterbank market and their reserve accounts. Finally, the focus comes on cross border differences in the use of collateral within the euro area in order to analyse the projects currently debated for the reform of collateral lists.

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    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9822/9707
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    Bibliographic Info

    Article provided by Banca Nazionale del Lavoro in its journal BNL Quarterly Review.

    Volume (Year): 57 (2004)
    Issue (Month): 228 ()
    Pages: 71-100

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    Handle: RePEc:psl:bnlaqr:2004:13

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    Related research

    Keywords: Monetary Policy; Monetary; Policy;

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    1. Dieter Nautz & Jörg Oechssler, 2003. "The Repo Auctions of the European Central Bank and the Vanishing Quota Puzzle," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(2), pages 207-220, 06.
    2. 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.
    3. Freixas, X. & Holthausen, C., 2001. "Interbank Market Integration under Asymmetric Information," Papers 74, Quebec a Montreal - Recherche en gestion.
    4. Kjell G. Nyborg & Ulrich Bindseil & Ilya A. Strebulaev, 2005. "Bidding and Performance in Repo Auctions: Evidence from ECB Open Market Operations," Working Papers 2005.92, Fondazione Eni Enrico Mattei.
    5. Leinonen, Harry, 1998. "Interbank funds transfer systems: liquidity needs, counterparty risks and collateral," Research Discussion Papers 16/1998, Bank of Finland.
    6. Paolo Angelini, 2002. "Liquidity and Announcement Effects in the Euro Area," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 451, Bank of Italy, Economic Research and International Relations Area.
    7. repec:wop:humbsf:1999-79 is not listed on IDEAS
    8. Hartmann, Philipp & Manna, Michele & Manzanares, Andres, 2001. "The microstructure of the euro money market," Journal of International Money and Finance, Elsevier, vol. 20(6), pages 895-948, November.
    9. Tobias Linzert & Dieter Nautz & Jorg Breitung, 2004. "Bidder behaviour in repo auctions without minimum bid rate: evidence from the Bundesbank," Money Macro and Finance (MMF) Research Group Conference 2003 55, Money Macro and Finance Research Group.
    10. Välimäki, Tuomas, 2002. "Variable rate liquidity tenders," Research Discussion Papers 24/2002, Bank of Finland.
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