Equilibrium bidding in the Eurosystem's open market operations
Open market operations play a key role in allocating central bank funds to the banking system and thereby to steer short-term interest rates in line with the stance of monetary policy. This note presents some elements of a theory of bidding in central bank tenders in a framework such as the one of the Eurosystem. The ECB has so far used fixed rate tenders and a variant of the variable rate tender, which may be similar to a fixed rate tender depending on market circumstances. In doing so, it faced consecutively an 'under-' and an 'overbidding' issue. The tools developed in this note to understand the bidding behavior of banks in these operations allow revisiting these phenomena and the more general question of the optimal tender procedure and allotment policy. JEL Classification: D84, E43, E52
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Juan Ayuso & Rafael Repullo, 2000.
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"Why Did the Banks Overbid? An Empirical Model of the Fixed Rate Tenders of the European Cental Bank,"
0104, Centro de Estudios Monetarios Y Financieros-.
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- Juan Ayuso & Rafael Repullo, 2001. "Why Did the Banks Overbid? An Empirical Model of the Fixed Rate Tenders of the European Central Bank," Working Papers 0105, Banco de España;Working Papers Homepage.
- Bartolini, Leonardo & Bertola, Giuseppe & Prati, Alessandro, 2001.
"Banks' reserve management, transaction costs, and the timing of Federal Reserve intervention,"
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- 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.
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