On several occasions during the period 2001-2003, the European Central Bank (ECB) decided to deviate from its "neutral" benchmark allotment rule, with the effect of not alleviating a temporary liquidity shortage in the banking system. This is remarkable because it implied the possibility of...

We model the interbank market for overnight credit with heterogeneous banks and asymmetric information. An unsophisticated bank just trades to compensate its liquidity imbalance, while a sophisticated bank will exploit its private information about the liquidity situation in the market. It is...

In certain market environments, a large investor may benefit from building up a futures position first and trading subsequently in the spot market (Kumar and Seppi, 1992). The present paper identifies a variation of this type of manipulation that might occur in money markets with an interest...

It is argued that bidders in liquidity-providing central bank operations should typically possess declining marginal valuations. Based on this hypothesis, we construct an equilibrium in central bank refinancing operations organised as variable rate tenders. In the case of the discriminatory...

The fixed rate tender is one of the main procedural formats relied upon by central banks in their implementation of monetary policy. This fact stands in a somewhat puzzling contrast to the prevalent view in the theoretical literature that the procedure, by fixing interest rate and quantity at...

This paper contributes to the existing literature on central bank repo auctions. It is based on a structural econometric approach, whereby the primitives of bidding behavior (individual bid schedules and bid-shading components) are directly estimated. With the estimated parameters we calibrate a...

In this paper, we discuss the consequences of taking into account the variations of the natural real interest rate (r t *) in simple monetary policy rules. We also provide one possible model-based analysis of the level of r t * that has prevailed in the euro area since the early 1970s, and...

This paper analyses the pricing of bank loans and deposits in euro area countries. We show that retail bank interest rates adjust not only to changes in short-term interest rates but also to long-term interest rates. This result, which is arguably intuitive for long-term retail bank rates, is...

This paper uses a unique comprehensive database on French security assets and liabilities to study the dynamics of domestic and external sectoral portfolios, their network structure, and their role in the propagation of shocks. We first show how the sharp deterioration of the net external...

This paper estimates the factors underlying the volatility of the euro overnight interest rate and its transmission along the euro area money market yield curve. A new multivariate unobserved components model is proposed allowing for both long-memory and stationary cyclical dynamics. Using...