Understanding the cost difference between intraday and overnight liquidity
AbstractCentral banks typically supply intraday and overnight reserves at very different costs. The cost of intraday reserves is very close to zero, while the cost of overnight reserves is much higher. In this paper, we discuss the different roles played by reserves intraday and overnight and review recent work trying to understand and explain that difference. We argue that while there is now broad agreement that intraday reserves should have a very low cost. Whether overnight reserves should have a high marginal cost remains an open question.
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Bibliographic InfoArticle provided by Capco Institute in its journal Journal of Financial Transformation.
Volume (Year): 24 (2008)
Issue (Month): ()
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Other versions of this item:
- Bhattacharya, Joydeep & Haslag, Joseph & Martin, Antoine, 2003. "Understanding the Cost Difference Between Intraday and Overnight Liquidity," Staff General Research Papers 13049, Iowa State University, Department of Economics.
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
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