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Treasury Bills And/Or Central Bank Bills For Absorbing Surplus Liquidity: The Main Considerations

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  • OBERT NYAWATA

    (International Monetary Fund, USA)

Abstract

This paper discusses the challenging question of whether central banks should use Treasury bills or central bank bills for draining excess liquidity in the banking system. While recognizing that there are practical reasons for using central bank bills, the paper argues that Treasury bills are the first best option especially because of the positive externalities for the financial sector and the rest of the economy. However, the main considerations in the choice should be: (i) operational independence for the central bank; (ii) market development; and (iii) the strengthening of the transmission of monetary policy impulses.

Suggested Citation

  • Obert Nyawata, 2013. "Treasury Bills And/Or Central Bank Bills For Absorbing Surplus Liquidity: The Main Considerations," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(02), pages 1-32.
    • Handle: RePEc:wsi:jicepx:v:04:y:2013:i:02:n:s1793993313500117
    DOI: 10.1142/S1793993313500117
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    2. Canetg, Fabio & Kaufmann, Daniel, 2022. "Overnight rate and signalling effects of central bank bills," European Economic Review, Elsevier, vol. 143(C).

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    More about this item

    Keywords

    Consolidated public sector; monetary policy; liquidity management; H63; D53; E52; O23; E43; J38;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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