The daily market for funds in Europe: Has something changed with the EMU?
AbstractThis paper presents evidence that the existence of deposit and lending facilities combined with an averaging provision for the reserve requirement are powerful tools to stabilize the overnight rate. We reach this conclusion by comparing the behavior of this rate in Germany before and after the start of Stage III of the EMU. The analysis of the German experience is useful because it allows us to isolate the effects on the overnight rate of these particular instruments of monetary policy. To show that this outcome is a general conclusion and not a particular result of the German market, we develop a theoretical model of reserve management which is able to reproduce our empirical findings.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 474.
Date of creation: Jul 2000
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Web page: http://www.econ.upf.edu/
Overnight rates; reserve demand; Martingale hypothesis;
Other versions of this item:
- Quiro, G.P. & Mendizabal, H.R., 2001. "The Daily Market for Funds in Europe: Has Something Changed with the EMU," Papers 67, Quebec a Montreal - Recherche en gestion.
- Pérez Quirós, Gabriel & Rodríguez Mendizábal, Hugo, 2001. "The daily market for funds in Europe: Has something changed with the EMU?," Working Paper Series 0067, European Central Bank.
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-07-03 (All new papers)
- NEP-EEC-2000-07-22 (European Economics)
- NEP-FMK-2000-07-03 (Financial Markets)
- NEP-MON-2000-07-03 (Monetary Economics)
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