 The daily market for funds in Europe: Has something changed with the EMU?Gabriel Perez Quiros and Hugo Rodriguez Mendizabal Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra 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 start of Stage III of the EMU. The analysis of the German experience is useful because it allows us to isolate the effects on the overnight rate of these particular instruments of monetary policy. To show that this outcome is a general conclusion and not a particular result of the German market, we develop a theoretical model of reserve management which is able to reproduce our empirical findings. Keywords: Overnight rates; reserve demand; Martingale hypothesis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:474 Access Statistics for this paper More papers in Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra |
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