Understanding the cost difference between intraday and overnight liquidity

Joydeep Bhattacharya, Joseph Haslag and Antoine Martin

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: In most countries, the cost of reserves intraday is very close to zero. Many central banks, including the European Central Bank (ECB), the Bank of England, or the Swiss National Bank allow collateralized intraday borrowing at no cost. In the U.S., banks are allowed to incur uncollateralized daylight overdrafts for which they incur a small fee2. In contrast, most countries rely on a positive marginal cost of overnight reserves for the implementation of their monetary policies. In the Euro Area, the cost is at least as large as the difference between the policy rate and the rate the ECB pays on reserves deposited by banks, which is 100 basis points. In the U.S., the cost corresponds to the Fed funds target, since the Fed does not pay interest on reserves.

Date: 2008-11-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://dr.lib.iastate.edu/server/api/core/bitstre ... 168d6e854641/content
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
Journal Article: Understanding the cost difference between intraday and overnight liquidity (2008)
Working Paper: Understanding the Cost Difference Between Intraday and Overnight Liquidity (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:isu:genstf:200811010700001825

Access Statistics for this paper

More papers in ISU General Staff Papers from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC.
Bibliographic data for series maintained by Curtis Balmer ().