IDEAS home Printed from
   My bibliography  Save this article

Implementing monetary policy using a corridor system


  • Aleksander Berentsen


For most central banks, the short-term interest rate in the interbank market (the money market rate) is the operational target. They use two main instruments to influence the money market rate: standing facilities and/or open market operations. For instance, the European Central Bank (ECB) offers a borrowing facility and a deposit facility, and conducts weekly liquidity auctions. Through its borrowing facility, the ECB stands ready to lend cash overnight against proper collateral at a fixed rate – the marginal lending facility rate, or the lending rate for short. With the ECB’s deposit facility, banks with excess cash can make overnight deposits and earn the deposit facility rate or deposit rate. Through its weekly liquidity auctions, banks can obtain cash (against proper collateral) if they bid a rate which is sufficiently high (relative to other bids) and higher than the minimum bid rate set by the ECB. The minimum bid rate can be considered as the ECB’s policy target rate for the shortterm money market rate. JEL Classification: E40, E50, D83

Suggested Citation

  • Aleksander Berentsen, 2006. "Implementing monetary policy using a corridor system," Research Bulletin, European Central Bank, vol. 5, pages 8-10.
  • Handle: RePEc:ecb:ecbrbu:2006:0005:3

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    monetary policy; interest rates;

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecb:ecbrbu:2006:0005:3. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Official Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.