A search-based model of the interbank money market and monetary policy implementation

Morten Bech () and Cyril Monnet

No 529, BIS Working Papers from Bank for International Settlements

Abstract: We present a search-based model of the interbank money market and monetary policy implementation. Banks are subject to reserve requirements and the central bank tenders reserves. Interbank payments redistribute holdings and banks trade with each other in a decentralized (over-the-counter) market. The central bank provides standing facilities where banks can either deposit surpluses or borrow to cover shortfalls of reserves overnight. The model provides insights on liquidity, trading volume, and rate dispersion in the interbank market - features largely absent from the canonical models in the tradition of Poole (1968) - and fits a number of stylized facts for the Eurosystem observed during the recent period of unconventional monetary policies. Moreover, it provides insights on the implications of different market structures.

Keywords: Interbank market; monetary policy implementation; unconventional monetary policy (search for similar items in EconPapers)
Pages: 44 pages
Date: 2015-11
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: A search-based model of the interbank money market and monetary policy implementation (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:529

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