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Why Did the Banks Overbid? An Empirical Model of the Fixed Rate Tenders of the European Cental Bank

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Author Info

  • Ayuso, J.
  • Repullo, R.

Abstract

This paper tests two hypotheses for the overbidding behavior of the banks in the fixed rate tenders conducted by the European Central Bank (ECB) from January 1999 until June 2000. One hypothesis attributes the overbidding to the expectations of a future tightening of monetary policy, while the other attributes it to the liquidity allotment decisions of the ECB. The model is estimated with individual bidding data of the Spanish banks, and also with aggregate bidding data of all Spanish banks and all banks in the euro area. The empirical results provide support for the second hypothesis.

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Bibliographic Info

Paper provided by Centro de Estudios Monetarios Y Financieros- in its series Papers with number 0104.

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Length: 19 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:fth:cemfdt:0104

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Postal: Centro de Estudios Monetarios Y Financieros. Casado del Alisal, 5-28014 Madrid, Spain.
Phone: 914290551
Fax: 914291056
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Web page: http://www.cemfi.es/
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Keywords: CENTRAL BANKS ; MONEY ; AUCTIONS ; BEHAVIOUR;

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References

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  1. Ayuso, Juan & Repullo, Rafael, 2000. "A Model of the Open Market Operations of the European Central Bank," CEPR Discussion Papers 2605, C.E.P.R. Discussion Papers.
  2. repec:wop:humbsf:1999-79 is not listed on IDEAS
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
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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. 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.
  3. Bindseil, Ulrich, 2002. "Equilibrium bidding in the Eurosystem's open market operations," Working Paper Series 0137, European Central Bank.
  4. Linzert, Tobias & Nautz, Dieter & Bindseil, Ulrich, 2004. "The longer term refinancing operations of the ECB," Working Paper Series 0359, European Central Bank.
  5. Pérez-Quirós, Gabriel & Rodriguez Mendizabal, Hugo, 2010. "Asymmetric Standing Facilities: An Unexploited Monetary Policy Tool," CEPR Discussion Papers 7789, C.E.P.R. Discussion Papers.
  6. 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).
  7. Leonardo Bartolini & Alessandro Prati, 2003. "The execution of monetary policy: a tale of two central banks," Staff Reports 165, Federal Reserve Bank of New York.
  8. 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.
  9. 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.
  10. Würtz, Flemming Reinhardt, 2003. "A comprehensive model on the euro overnight rate," Working Paper Series 0207, European Central Bank.
  11. Ewerhart, Christian & Cassola, Nuno & Valla, Natacha, 2005. "Equilibrium and inefficiency in fixed rate tenders," Working Paper Series 0554, European Central Bank.
  12. 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.
  13. 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.
  14. Jürgen Wiemers & Ulrike Neyer, 2003. "Why do we have an interbank money market?," IWH Discussion Papers 182, Halle Institute for Economic Research.
  15. 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.

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