The euro area interbank market and the liquidity management of the eurosystem in the financial crisis
AbstractThis paper develops a theoretical model which explains several stylized facts observed in the euro area interbank market after the collapse of Lehman Brothers in 2008. The model shows that if costs of participating in the interbank market are high, the central bank assumes an intermediary function between liquidity surplus banks and liquidity deficit banks and thereby replaces the interbank market. From a policy perspective, we argue that possible measures of the Eurosystem to reactivate the interbank market may conflict, inter alia, with monetary policy aims. --
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Bibliographic InfoPaper provided by Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) in its series DICE Discussion Papers with number 09.
Date of creation: 2010
Date of revision:
Liquidity; Monetary Policy Instruments; Interbank Market; Financial Crisis;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- G01 - Financial Economics - - General - - - Financial Crises
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-13 (All new papers)
- NEP-BAN-2010-11-13 (Banking)
- NEP-CBA-2010-11-13 (Central Banking)
- NEP-EEC-2010-11-13 (European Economics)
- NEP-FMK-2010-11-13 (Financial Markets)
- NEP-MAC-2010-11-13 (Macroeconomics)
- NEP-MON-2010-11-13 (Monetary Economics)
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