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Monetary transmission right from the start: On the information content of the Eurosystem's main refinancing operations

Puriya Abbassi and Dieter Nautz ()

The North American Journal of Economics and Finance, 2012, vol. 23, issue 1, 54-69

Abstract: The Eurosystem's main refinancing operations (MROs) are key for the interbank money market and the monetary transmission process in the euro area. This paper investigates how money market rates respond to the information revealed by various aspects of an MRO auction outcome. Our results confirm that the level of MRO rates governed short-term money market rates before the financial crisis. Since the start of the financial crisis, however, the information content of MRO rates has changed. While the levels of MRO rates have lost much of their pre-crisis significance, the spread between the weighted average and the marginal MRO rate has become an important barometer for the actual situation in the money market during the crisis.

Keywords: Monetary policy implementation; Central bank auctions; European Central Bank; Money markets; Financial crisis (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 D44 (search for similar items in EconPapers)
Date: 2012
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