We investigate how European banks' overnight borrowing costs depend on bank size. We use the Eurosystem's proprietary interbank daily loan data on euro-denominated transactions from 2008-2014. We find that large banks have had a clear borrowing cost advantage over small banks and that this...

We study whether the mechanism design in the central bank liquidity auctions matters for the interbank money market interest rate levels and volatility. Furthermore, we compare different mechanisms to sell liquidity in terms of revenue, efficiency and auction stage interest rate levels and...

Using the maximum entropy method, this paper estimates the danger of contagion in the Finnish interbank market in 2005–2007 as well as the existence of contagion during a Finnish banking crisis. The contagion analysis of the early 1990s is able to predict the most troublesome and defaulting...

The simulation technique provides a new means for analysing complex interdependencies in payment and securities settlement processing. The Bank of Finland has developed a payment and settlement system simulator (BoF-PSS2) that can be used for constructing simulation models of payment and...

This paper analyses different operational central bank policies and their impact on the behaviour of the money market interest rate. The model combines profit maximising behaviour by commercial banks with the central bank supplying the liquidity that keeps the market rate on target. It seems...

This paper studies the implication of extreme shocks for monetary policy. The analysis is based on a small-scale New Keynesian model with sticky prices and wages where shocks are drawn from asymmetric Generalized Extreme Value distributions. A nonlinear perturbation solution of the model is...

Payment systems are undergoing rapid and fundamental changes stimulated largely by technological progress especially distributed network technology and real-time processing.Internet and e-commerce will have a major impact on payment systems in the future.User demands and competition will speed...

This paper presents a model on the demand for money market funds (MMFs).These funds are a very close substitute for M1 deposits, except that MMFs do not satisfy immediate transaction requirements. The demand for MMFs strengthens when the intended volume of transactions is low.A high interest...

This study utilizes payment system data to analyze market participants' liquidity usage and to trace interest rates paid on overnight loans. Our aim is to examine how liquidity usage has changed during the years 2006–2/2011 and to combine this information with data on overnight lending rates...