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Banks' Behaviour in the European Money Market and the Operational Framework of the Eurosystem

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  • Neyer, Ulrike

    (Martin-Luther-University Halle-Wittenberg)

Abstract

The Eurosystem has stated its intention to reformulate important aspects of its operational framework. This paper presents a model to analyze banks' behaviour in the European money market. Its main result is that the suggested alterations are sensible, but that further improvements should be undertaken. Under the current framework under- and overbidding behaviour in the main refinancing operations and wildly differing provisions of required reserves can occur. This can be avoided if first, the maturities of the main refinancing operations do not overlap, and second, if the required reserves are not remunerated at an average rate.

Suggested Citation

  • Neyer, Ulrike, 2003. "Banks' Behaviour in the European Money Market and the Operational Framework of the Eurosystem," Royal Economic Society Annual Conference 2003 158, Royal Economic Society.
  • Handle: RePEc:ecj:ac2003:158
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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

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