A Model of the Open Market Operations of the European Central Bank
We construct a model to nalyze the two types of tender procedures used by the European Central Bank in its open market operations. We assume that the ECB minimizes the expected value of a loss function that depends on the quadratic difference between the interbank rate and a target interest rate that characterizes the stance of monetarty policy. We show that when the loss fuction penalizes more heavily interbank rates below the target, fixed rate tenders have a unique equilibrium characterized by extreme overbidding.
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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.
- Nautz, Dieter & Oechssler, Jörg, 1999.
"The repo auctions of the European Central Bank and the vanishing quota puzzle,"
SFB 373 Discussion Papers
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- 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.
- 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.
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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,"
3220231, Harvard University Department of Economics.
- Campbell, John Y, 1987. "Money Announcements, the Demand for Bank Reserves, and the Behavior of the Federal Funds Rate within the Statement Week," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(1), pages 56-67, February.
- John Y. Campbell, 1986. "Money Announcements, the Demand for Bank Reserves and the Behavior of the Federal Funds Rate Within the Statement Week," NBER Working Papers 1806, National Bureau of Economic Research, Inc.
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