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Declining Valuations and Equilibrium Bidding Central Bank Refinancing Operations

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  • Cassola, N.
  • Ewerhart , C.
  • Valla, N.

Abstract

It is argued that bidders in liquidity-providing central bank operations should typically possess declining marginal valuations. Based on this hypothesis, we construct equilibrium in central bank refinancing operations organised as variable rate tenders. In the case of the discriminatory pricing rule, bid shading does not disappear in large populations. The predictions of the model are shown to be consistent with the data for the euro area.

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Bibliographic Info

Paper provided by Banque de France in its series Working papers with number 151.

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Length: 43 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:bfr:banfra:151

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Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/
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Related research

Keywords: Open market operations ; Uniform price auction ; Discriminatory auction ; Eurosystem.;

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References

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Cited by:
  1. Cassola, Nuno & Ewerhart, Christian & Morana, Claudio, 2007. "Structural econometric approach to bidding in the main refinancing operations of the Eurosystem," Working Paper Series 0793, European Central Bank.

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