This paper investigates various theories explaining banks' overbidding in the fixed rate tenders of the European Central Bank (ECB). Using auction data from both the Bundesbank and the ECB, we show that none of the theories can on its own explain the observed overbidding. This implies that the proposed new rules by the ECB, aimed at neutralizing interest rate expectations, would not eliminate overbidding if the rationing rule in the fixed rate tenders remains unchanged.
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Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number
bgse10_2003.
Length: 18 Date of creation: Jun 2003 Date of revision: Handle: RePEc:bon:bonedp:bgse10_2003
Contact details of provider: Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany Fax: +49 228 73 9221 Web page: http://www.bgse.uni-bonn.de/index.php?id=494
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Find related papers by JEL classification: E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
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