Demand drivers of central bank liquidity: A time-to-exit TLTRO analysis

Adina-Elena Fudulache and María del Carmen Castillo Lozoya
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Adina-Elena Fudulache: EUROPEAN CENTRAL BANK AND GOETHE UNIVERSITY FRANKFURT
María del Carmen Castillo Lozoya: BANCO DE ESPAÑA

No 2548, Working Papers from Banco de España

Abstract: We exploit banks’ early repayments of targeted longer-term refinancing operations (TLTRO) following the program’s recalibration in October 2022 as a laboratory to uncover demand drivers of central bank liquidity. We formulate and estimate a discrete-time hazard model to early exit from TLTRO to identify what bank (country) characteristics drive a sticky, prolonged demand for central bank (long-term) operations as opposed to an early exit from such facilities. We also examine whether the more liquidity-risk exposed banks during the TLTRO phasing out period had a higher probability of becoming “liquidity dependent” on the ECB when exiting (Acharya et al., 2023). Finally, we discuss the policy implications of our findings, particularly in the context of the recent review of the ECB’s operational framework.

Keywords: monetary policy normalisation; TLTRO; demand-driven operational frameworks; discrete-time hazard models (search for similar items in EconPapers)
JEL-codes: C41 E52 E58 G21 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2025-12
New Economics Papers: this item is included in nep-eec and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2548

DOI: 10.53479/41885

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