The daily market for funds in Europe: Has something changed with the EMU?
This paper presents evidence that the existence of deposit and lending facilities combined with an averaging provision for the reserve requirement are powerful tools to stabilize the overnight rate. We reach this conclusion by comparing the behavior of this rate in Germany before and after the beginning of the EMU. The analysis of the German experience is useful because it allows us to isolate specifically the effect on the overnight rate of these particular instruments of monetary policy. To show that this outcome is general and not a particular result for the German market, we develop a theoretical model of reserve management which is able to reproduce our empirical findings. JEL Classification: E44, E52
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- Hamilton, James D, 1996. "The Daily Market for Federal Funds," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 26-56, February.
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- Campbell, John, 1987. "Money Announcements, The Demand for Bank Reserves, and the Behavior of the Federal Funds Rate within the Statement Week," Scholarly Articles 3220231, Harvard University Department of Economics.
- Leonardo Bartolini & Giuseppe Bertoli & Alessandro Prati, 2000.
"Banks' Reserve Management, Transaction Costs, and the Timing of Federal Reserve Intervention,"
Econometric Society World Congress 2000 Contributed Papers
0123, Econometric Society.
- Bartolini, Leonardo & Bertola, Giuseppe & Prati, Alessandro, 2001. "Banks' reserve management, transaction costs, and the timing of Federal Reserve intervention," Journal of Banking & Finance, Elsevier, vol. 25(7), pages 1287-1317, July.
- Giuseppe Bertola & Leonardo Bartolini & Alessandro Prati, 2000. "Banks' Reserve Management, Transaction Costs, and the Timing of Federal Reserve Intervention," IMF Working Papers 00/163, International Monetary Fund.
- Bindseil, Ulrich & Seitz, Franz, 2001. "The supply and demand for Eurosystem deposits - The first 18 months," Working Paper Series 0044, European Central Bank.
- Spindt, Paul A. & Hoffmeister, J. Ronald, 1988. "The Micromechanics of the Federal Funds Market: Implications for Day-of-the-Week Effects in Funds Rate Variability," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(04), pages 401-416, December.
- Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
- Gabriel Pérez & Hugo Rodríguez, 2000. "The daily market for funds in Europe: Mathematical appendix," Economics Working Papers 496, Department of Economics and Business, Universitat Pompeu Fabra.
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