Central 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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Publisher Info
Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number
13049.
Length: Date of creation: 13 Mar 2009 Date of revision: Publication status: Published in Journal of Financial Transformation, 2008, Vol. 24, pp. 105 - 107. Handle: RePEc:isu:genres:13049
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Find related papers by JEL classification: E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit