How can a central bank control interest rates in an environment with large excess reserves? In this paper, we develop a dynamic general equilibrium model of a secured money market and calibrate it to the Swiss franc repo market to study this question. The theoretical model allows us to identify...

In response to the financial crisis of 2007/08, all major central banks decreased interest rates to historically low levels and created large excess reserves. Central bankers and academics currently discuss how to implement monetary policy, going forward. We find that paying interest on reserves...

Major central banks remunerate reserves at negative interest rates and it is increasingly likely that they will keep rates negative for many more years. To study the long run implications of negative rates, we construct a dynamic general equilibrium model with commercial banks funding investment...