Summary Understanding the factors determining overnight rates is crucial both for central bankers and private market participants, since, assuming the validity of the expectation theory of the term structure of interest rates, expectations with regard to this “monadic” maturity should...

TARGET2 and the European Sovereign Debt Crisis The TARGET2 (T2) positions on the balance sheets of euro area national central banks (NCBs) have increased unprecedentedly since the beginning of the financial crisis. Currently only four euro area NCBs record T2 claims, while the remaining NCBs are...

Elemente einer Theorie der Liquiditätssteuerung von Notenbanken Die "Liquiditätssteuerung" einer Notenbank wird definiert als der Rahmen, die Instrumente und Regeln, die die Notenbank zur Steuerung des Angebots an Bankreserven, und damit zur Steuerung von deren Preis (d.h. insb. des...

Rapid and large deposit outflows from banks have regained attention in the context of the March 2023 demises of Credit Suisse, SVB and other regional US banks. Moreover, the possible introduction of CBDC or a marked success of stablecoins are perceived as additional clouds over the future of...

This paper employs individual bidding data to analyze the empirical performance of the longer term refinancing operations (LTROs) of the European Central Bank (ECB). We investigate how banks’ bidding behavior is related to a series of exogenous variables such as collateral costs, interest...

This paper explains to what extent excess reserves are and should be relevant today in the implementation of monetary policy, focusing on the specific case of the operational framework of the Eurosystem. In particular, this paper studies the impact that changes to the operational framework for...

Before 1914, there was little doubt that central bank policy meant first of all control of short term interest rates. This changed dramatically in the early 1920s with the birth of “reserve position doctrine” (RPD) in the US, according to which a central bank should, via open market...

This paper explores the role of central bank capital in ensuring that central banks focus on price stability in monetary policy decisions. The paper goes beyond the existing literature on this topic by developing a simple, but comprehensive, model of the relationship between a central bank's...

The banking system is modeled in a closed system of financial accounts, whereby the equilibrium volume of bank intermediation between households and corporates reflects structural parameters such as household preferences, comparative cost structures of heterogeneous banks, loan demand of...

Containing short-term volatility of the overnight interest rate is normally considered the main objective of central bank standing facilities. This paper develops a simple stochastic model to show how the width of the central bank standing facilities corridor affects banks’ day-to-day...