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Declining Valuations And Equilibrium Bidding In Central Bank Refinancing Operations

Christian Ewerhart (), Nuno Cassola and Natacha Valla
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Nuno Cassola: European Central Bank

No 07-22, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Among the most puzzling observations for the euro money market are the bid shading in the weekly refinancing operations and the development of interest rate spreads. To explain these observations, we consider a standard divisible-good auction à la Klemperer and Meyer (1989) with uniform or discriminatory pricing, and place it in the context of a secondary market for interbank credit. The analysis links the observations for the euro area to the endogenous choice of collateral in credit transactions. We also discuss the Eurosystem’s apparent preference for the discriminatory pricing rule.

Keywords: Eurosystem; discriminatory auction; bid shading; collateral (search for similar items in EconPapers)
JEL-codes: D44 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2007-07
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Related works:
Journal Article: Declining valuations and equilibrium bidding in central bank refinancing operations (2010) Downloads
Working Paper: Declining valuations and equilibrium bidding in central bank refinancing operations (2006) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp0722

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