On 3 July 2015, SUERF organized its sixth joint conference with the Bank of Finland in Helsinki on the subject of liquidity and market efficiency. The one-day program consisted of an opening speech, six presentations, including three keynotes, and a lunchtime address. The present SUERF Study...

We study the basic economic problem of choice between long-term and short-term commitments under a general characterization of uncertainty (aggregate uncertainty). When contingencies are contractible, a perfect market of Arrow-Debreau contingent claims implements the social optimum. When...

This study utilises payment system data to analyse 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...

The paper analyses the severity of gridlocks in interbank payment systems operating on a real time basis and evaluates by means of simulations the merits of a gridlock resolution algorithm. Data used in the simulations consist of actual payments settled in the Danish and Finnish RTGS systems....

We study the long standing issue of whether markets can supply banks with sufficient liquidity or whether markets should be complemented with a lender of last resort (LOLR). For this purpose, we develop an extended version of the recent model of Holmström and Tirole (1998) on the supply of...

Averaging the reserve requirement is often considered an efficient way to reduce volatility at the very short end of the money market yield curve. The Bank of Finland began to apply an averaging provision at the beginning of October 1995. Notably, the volatility of the overnight rate of interest...

The operating speed of a payment system depends on the stage of technology of the system's communication and information processing environment. Frequent intraday processing cycles and real-time processing have introduced new means of speeding up the processing and settlement of payments. In a...

In the Eurosystem, banks’ interest rate expectations should no longer have resulted in a non-zero tender spread, the difference between marginal and minimum price for liquidity, when the ECB reformed its op-erational framework for monetary policy implementation in March 2004 so that the policy...

We sketch a theoretical framework for comparing the properties of funded LOLR schemes. We construct an idealized lender of last resort and investigate how it formulates policy under alternative public and private governance structures. The alternatives are a (first-best) social utility maximizer...