Fixed- and Variable-Rate Tenders in the Management of Liquidity by the Eurosystem: Implications of the Recent Credit Crisis
Most liquidity-providing operations of the European Central Bank (ECB) have been conducted through variable-rate tenders. However, fixed rates were first employed in the main refinancing operations (MROs) and are still used in other liquidity management operations. In October 2008, the ECB decided to carry MROs again at a fixed rate. In a simple threestage game in which banks can obtain liquidity through the open-market operations of the ECB, through interbank transactions, or through “standing facilities,” this paper revisits the dilemma between fixed- and variable-rate procedures, with an emphasis on the scenarios that are particularly relevant under the recent credit crisis, namely collateral shortage, rationing in the interbank market, and non-acute estimation by the ECB of the system’s liquidity needs.
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- Dieter Nautz & Jörg Oechssler, 2003.
"The Repo Auctions of the European Central Bank and the Vanishing Quota Puzzle,"
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- Nautz, Dieter & Oechssler, Jörg, 1999. "The repo auctions of the European Central Bank and the vanishing quota puzzle," SFB 373 Discussion Papers 1999,79, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Dieter Nautz & Jörg Oechssler, 2001. "The Repo Auctions of the European Central Bank and the Vanishing Quota Puzzle," Bonn Econ Discussion Papers bgse9_2001, University of Bonn, Germany.
- Giuseppe Bruno & Ernesto Maurizio Ordine & Antonio Scalia, 2005. "Banksï¿½ participation in the Eurosystem auctions and money market integration," Temi di discussione (Economic working papers) 562, Bank of Italy, Economic Research and International Relations Area. Full references (including those not matched with items on IDEAS)
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