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Demand drivers of central bank liquidity: A time-to-exit TLTRO analysis

Author

Listed:
  • Adina-Elena Fudulache

    (EUROPEAN CENTRAL BANK AND GOETHE UNIVERSITY FRANKFURT)

  • María del Carmen Castillo Lozoya

    (BANCO DE ESPAÑA)

Abstract

We exploit banks’ early repayments of targeted longer-term refinancing operations (TLTRO) following the program’s recalibration in October 2022 as a laboratory to uncover demand drivers of central bank liquidity. We formulate and estimate a discrete-time hazard model to early exit from TLTRO to identify what bank (country) characteristics drive a sticky, prolonged demand for central bank (long-term) operations as opposed to an early exit from such facilities. We also examine whether the more liquidity-risk exposed banks during the TLTRO phasing out period had a higher probability of becoming “liquidity dependent” on the ECB when exiting (Acharya et al., 2023). Finally, we discuss the policy implications of our findings, particularly in the context of the recent review of the ECB’s operational framework.

Suggested Citation

  • Adina-Elena Fudulache & María del Carmen Castillo Lozoya, 2025. "Demand drivers of central bank liquidity: A time-to-exit TLTRO analysis," Working Papers 2548, Banco de España.
    • Handle: RePEc:bde:wpaper:2548
    DOI: https://doi.org/10.53479/41885
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    References listed on IDEAS

    as
    1. Fudulache, Adina-Elena & Goetz, Martin R., 2023. "Long-term deposit funding and demand for central bank funds: Evidence from targeted longer-term refinancing operations," Discussion Papers 12/2023, Deutsche Bundesbank.
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    More about this item

    Keywords

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    JEL classification:

    • 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
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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