The daily market for funds in Europe: Has something changed with the EMU?

Gabriel Perez Quiros and Hugo Rodriguez Mendizabal

No 67, Working Paper Series from European Central Bank

Abstract: This paper presents evidence that the existence of deposit and lending facilities combined with an averaging provision for the reserve requirement are powerful tools to stabilize the overnight rate. We reach this conclusion by comparing the behavior of this rate in Germany before and after the beginning of the EMU. The analysis of the German experience is useful because it allows us to isolate specifically the effect on the overnight rate of these particular instruments of monetary policy. To show that this outcome is general and not a particular result for the German market, we develop a theoretical model of reserve management which is able to reproduce our empirical findings. JEL Classification: E44, E52

Keywords: martingale hypothesis; overnight rates; reserve demand (search for similar items in EconPapers)
Date: 2001-06
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Citations: View citations in EconPapers (25)

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Working Paper: The Daily Market for Funds in Europe: Has Something Changed with the EMU (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:200167

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