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 InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 13049.
Date of creation: 01 Jan 2003
Date of revision:
Publication status: Published in Journal of Financial Transformation 2008, vol. 24, pp. 105-107
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Web page: http://www.econ.iastate.edu
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intraday liquidity; reserves; overnight reserves;
Other versions of this item:
- Bhattacharya, Joydeep & Haslag, Joseph & Martin, Antoine, 2008. "Understanding the cost difference between intraday and overnight liquidity," Journal of Financial Transformation, Capco Institute, vol. 24, pages 105-107.
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
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