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Understanding the cost difference between intraday and overnight liquidity

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Central banks typically supply intraday and overnight reserves at very different costs. The cost of intraday reserves is very close to zero, while the cost of overnight reserves is much higher. In this paper, we discuss the different roles played by reserves intraday and overnight and review recent work trying to understand and explain that difference. We argue that while there is now broad agreement that intraday reserves should have a very low cost. Whether overnight reserves should have a high marginal cost remains an open question.
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  • Bhattacharya, Joydeep & Haslag, Joseph & Martin, Antoine, 2008. "Understanding the cost difference between intraday and overnight liquidity," Journal of Financial Transformation, Capco Institute, vol. 24, pages 105-107.
  • Handle: RePEc:ris:jofitr:0024
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    Cited by:

    1. Jurgilas, Marius & Žikeš, Filip, 2014. "Implicit intraday interest rate in the UK unsecured overnight money market," Journal of Financial Intermediation, Elsevier, vol. 23(2), pages 232-254.

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    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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