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The overnight interbank market: evidence from the G-7 and the Euro zone

  • Alessandro Prati
  • Leonardo Bartolini
  • Giuseppe Bertola

This study of the major industrial countries' interbank markets for overnight loans links the behavior of very short-term interest rates to the operating procedures of the countries' central banks. Previous studies have focused on key features of the U.S. federal funds rate's behavior. We find that many of these features are not robust to changes in institutional details and in the style of central bank intervention, along both cross-sectional and time-series dimensions of our data. Our results suggest that the empirical features of the day-to-day behavior of short-term interest rates are more strongly influenced by institutional arrangements than by extensively researched market frictions.

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Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 135.

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Date of creation: 2001
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Handle: RePEc:fip:fednsr:135
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  12. Gabriel Pérez Quirós & Hugo Rodríguez, 2000. "The daily market for funds in Europe: Has something changed with the EMU?," Economics Working Papers 474, Department of Economics and Business, Universitat Pompeu Fabra.
  13. 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.
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  17. 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.
  18. Clouse, James A. & Dow Jr., James P., 1999. "Fixed costs and the behavior of the federal funds rate," Journal of Banking & Finance, Elsevier, vol. 23(7), pages 1015-1029, July.
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  27. Aspetsberger, A., 1996. "Open Market Operations in EU Countries," Papers 3, European Monetary Institute.
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  29. Claudio E. V. Borio, 1997. "Monetary policy operating procedures in industrial countries," BIS Working Papers 40, Bank for International Settlements.
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