Monetary transmission right from the start: The (dis)connection netween the money market and the ECB's main refinancing rates
AbstractThe relation between the ECB's main refinancing (MRO) rates and the money market is key for the monetary transmission process in the euro area. This paper investigates how money market rates respond to the new information revealed by MRO auctions. Our results confirm a stabilizing level relationship between the overnight rate Eonia and MRO rates before the financial crisis. Since the start of the financial crisis, however, we find that MRO auction outcomes even exacerbated the disconnection of money market rates from the policy-intended interest rate level. These findings support the fixed rate full allotment policy introduced by the ECB as an unconventionalmeasure to re-stabilize banks' refinancing conditions. --
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Bibliographic InfoPaper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2010/7.
Date of creation: 2010
Date of revision:
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Financial Crisis; Monetary transmission process; Central bank auctions; European Central Bank; Money markets;
Other versions of this item:
- Puriya Abbassi & Dieter Nautz, 2010. "Monetary Transmission Right from the Start: The (Dis)Connection Between the Money Market and the ECB’s Main Refinancing Rates," SFB 649 Discussion Papers SFB649DP2010-019, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Puriya Abbassi & Dieter Nautz, 2010. "Monetary Transmission Right from the Start: The (Dis)Connection Between the Money Market and the ECB’s Main Refinancing Rates," Working Papers, Gutenberg School of Management and Economics, Johannes Gutenberg-UniversitÃ¤t Mainz 1011, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 15 Jul 2010.
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- 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
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
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- Gabriel Pérez Quirós & Hugo Rodríguez Mendizábal, 2003.
"The Daily Market for Funds in Europe: What Has Changed with the EMU?,"
UFAE and IAE Working Papers, Unitat de Fonaments de l'AnÃ lisi EconÃ²mica (UAB) and Institut d'AnÃ lisi EconÃ²mica (CSIC)
559.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Quiros, Gabriel Perez & Mendizabal, Hugo Rodriguez, 2006. "The Daily Market for Funds in Europe: What Has Changed with the EMU?," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 38(1), pages 91-118, February.
- Gabriel Pérez-Quirós & Hugo Rodríguez Mendizábal, 2003. "The Daily Market for Funds in Europe: What has Changed with the EMU?," Working Papers 22, Barcelona Graduate School of Economics.
- Gabriel Pérez Quirós & Hugo Rodríguez Mendizábal, 2003. "The daily market for funds in Europe: what has changed with the EMU," Banco de Espaï¿½a Working Papers, Banco de Espaï¿½a 0313, Banco de Espa�a.
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