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Why Did the Banks Overbid? An Empirical Model of the Fixed Rate Tenders of the European Cental Bank

J. Ayuso and Rafael Repullo

Working Papers from Centro de Estudios Monetarios Y Financieros-

Abstract: This paper tests two hypotheses for the overbidding behavior of the banks in the fixed rate tenders conducted by the European Central Bank (ECB) from January 1999 until June 2000. One hypothesis attributes the overbidding to the expectations of a future tightening of monetary policy, while the other attributes it to the liquidity allotment decisions of the ECB. The model is estimated with individual bidding data of the Spanish banks, and also with aggregate bidding data of all Spanish banks and all banks in the euro area. The empirical results provide support for the second hypothesis.

Keywords: CENTRAL BANKS; MONEY; AUCTIONS; BEHAVIOUR (search for similar items in EconPapers)
JEL-codes: D44 E52 E58 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2001
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Citations: View citations in EconPapers (14)

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Journal Article: Why did the banks overbid? An empirical model of the fixed rate tenders of the European Central Bank (2001) Downloads
Working Paper: Why Did the Banks Overbid? An Empirical Model of the Fixed Rate Tenders of the European Central Bank (2001) Downloads
Working Paper: Why Did the Banks Overbid? An Empirical Model of the Fixed Rate Tenders of the European Cental Bank (2001) Downloads
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