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Excess reserves and implementation of monetary policy of the ECB

  • Bindseil, Ulrich
  • Camba-Méndez, Gonzalo
  • Hirsch, Astrid
  • Weller, Benedict
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    This paper explains to what extent excess reserves are and should be relevant today in the implementation of monetary policy, focusing on the speci?c case of the operational framework of the Eurosystem. In particular, this paper studies the impact that changes to the operational framework for monetary policy implementation have on the level and volatility of excess reserves. A ‘transaction costs’ model that replicates the rather speci?c intra-reserve maintenance period pattern of excess reserves in the euro area is developed. Simulation results presented not only show that excess reserves may increase considerably under some changes to the operational framework, but also that their volatility and hence unpredictability could. JEL Classification: E52, E58

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    File URL: http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp361.pdf
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    Paper provided by European Central Bank in its series Working Paper Series with number 0361.

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    Date of creation: May 2004
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    Handle: RePEc:ecb:ecbwps:20040361
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    1. Pérez Quirós, Gabriel & Rodríguez Mendizábal, Hugo, 2001. "The daily market for funds in Europe: Has something changed with the EMU?," Working Paper Series 0067, European Central Bank.
    2. Välimäki, Tuomas, 2001. "Fixed rate tenders and the overnight money market equilibrium," Research Discussion Papers 8/2001, Bank of Finland.
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