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A Model of the Open Market Operations of the European Central Bank

J. Ayuso and Rafael Repullo

Working Papers from Centro de Estudios Monetarios Y Financieros-

Abstract: We construct a model to nalyze the two types of tender procedures used by the European Central Bank in its open market operations. We assume that the ECB minimizes the expected value of a loss function that depends on the quadratic difference between the interbank rate and a target interest rate that characterizes the stance of monetarty policy. We show that when the loss fuction penalizes more heavily interbank rates below the target, fixed rate tenders have a unique equilibrium characterized by extreme overbidding.

Keywords: MONETARY POLICY; MARKET; AUCTIONS (search for similar items in EconPapers)
JEL-codes: D44 E52 E58 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2000
References: Add references at CitEc
Citations: View citations in EconPapers (19)

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Journal Article: A Model of the Open Market Operations of the European Central Bank (2003)
Working Paper: A Model of the Open Market Operations of the European Central Bank (2000) Downloads
Working Paper: A Model of the Open Market Operations of the European Central Bank (2000) Downloads
Working Paper: A Model of the Open Market Operations of the European Central Bank (2000) Downloads
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