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Why Did the Banks Overbid? An Empirical Model of the Fixed Rate Tenders of the European Cental Bank

Author

Listed:
  • Juan Ayuso
  • Rafael Repullo

Abstract

This paper tests two hypotheses for the overbidding behavior of the banks in the fixed rate tenders conducted by the European Central Bank (ECB) from January 1999 until June 2000. One hypothesis attributes the overbidding to the expectations of a future tightening of monetary policy, while the other attributes it to the liquidity allotment decisions of the ECB. The model is estimated with individual bidding data of the Spanish banks, and also with aggregate bidding data of all Spanish banks and all banks in the euro area. The empirical results provide support for the second hypothesis.

Suggested Citation

  • Juan Ayuso & Rafael Repullo, 2001. "Why Did the Banks Overbid? An Empirical Model of the Fixed Rate Tenders of the European Cental Bank," Working Papers wp2001_0104, CEMFI.
    • Handle: RePEc:cmf:wpaper:wp2001_0104
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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
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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