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The Design of the Eurosystem's Monetary Policy Instruments

:	Ulrike Neyer
:	The Design of the Eurosystem's Monetary Policy Instruments
:	Physica-Verlag
:	9783790819786
:	1
:	CHF 47.40
:

:	Volkswirtschaft
:	English

:	179
:	Wasserzeichen
:	PC/MAC/eReader/Tablet
:	PDF

The creation of a single monetary currency and a single monetary policy in the euro area has faced extraordinary challenges, among them the design of suitable monetary policy instruments. This book evaluates monetary policy instruments of the Eurosystem against a number of requirements. To do so, a theoretical model framework is developed which brings together the monetary policy activities of a central bank and the liquidity management of banks considering the main characteristics and institutional features of the euro area.

	Preface	6
	Contents	7
	1 Introduction 2 Monetary	7
	Policy Instruments of the Eurosystem	7
	3 Stylized Facts and First Explanations	7
	4 Base Model: Banks’ Liquidity Management and	7
	Interbank Market Equilibrium	7
	5 Remuneration of Required Reserves at the Current	8
	Repo Rate	8
	6 Remuneration of Required Reserves at an Average	8
	Rate	8
	7 Overlapping Maturities of Central Bank Credits	9
	8 Implications for the Eurosystem’s Operational	9
	Framework	9
	9 Summary	9
	Appendix	9
	References	9
	1 Introduction	10
	Aim of this Work	12
	Theoretical Analysis and Main Results	12
	Related Literature	15
	Contribution to the Literature	16
	Outline	16
	2 Monetary Policy Instruments of the Eurosystem	18
	2.1 Introduction	18
	2.2 Guiding Principles Behind the Design of the Eurosystem’s Monetary Policy Instruments	20
	2.3 Minimum Reserve System	20
	2.4 Open Market Operations	22
	Under- and Overbidding Behaviour: Definition	22
	Collateral Framework	23
	2.5 Standing Facilities	26
	2.6 Summary	27
	3 Stylized Facts and First Explanations	28
	3.1 The Overnight Rate	28
	3.2 Bidding Behaviour in the Main Refinancing Operations	32
	3.3 Fulfilling of Required Reserves	39
	3.4 Summary	41
	4 Base Model: Banks’ Liquidity Management and Interbank Market Equilibrium	42
	4.1 Introduction	42
	4.2 Optimal Liquidity Management of a Single Bank	43
	4.3 Interbank Market Equilibrium	46
	4.4 Summary	53
	5 Remuneration of Required Reserves at the Current Repo Rate	55
	5.1 Introduction	55
	5.2 Optimal Liquidity Management of a Single Bank	56
	5.3 Interbank Market Equilibrium and Final Results	62
	Equilibrium Interbank Market Rate	63
	Optimal Liquidity Management: Final Results	63
	Equilibrium Interbank Market Rate: Discussion	65
	The Impact of Monetary Policy Impulses	67
	Equilibrium Interbank Market Rate	69
	Optimal Liquidity Management: Final Results	70
	Equilibrium Interbank Market Rate: Discussion	72
	The Impact of Monetary Policy Impulses	75
	5.4 Summary	76
	6 Remuneration of Required Reserves at an Average Rate	79
	6.1 Introduction	79
	6.2 Optimal Liquidity Management of a Single Bank	79
	6.3 Interbank Market Equilibrium and Final Results	87
	Equilibrium Interbank Market Rate	87
	Optimal Liquidity Management: Final Results	88
	Equilibrium Interbank Market Rate: Discussion	90
	The Impact of Monetary Policy Impulses	93
	Equilibrium Interbank Market Rate	94
	Final Results for the Optimal Liquidity Management if the Repo Rate Is Cut	95
	Optimal Intertemporal Allocation of Required Reserves	97
	Optimal Borrowing from the Monetary Authority	98
	Optimal Transactions in the Interbank Market	99
	Final Results for the Optimal Liquidity Management if the Repo Rate Is Raised	101
	Optimal Intertemporal Allocation of Required Reserves	102
	Optimal Borrowing from the Monetary Authority	102
	Optimal Transactions in the Interbank Market	104
	Equilibrium Interbank Market Rate: Discussion	104
	Marginal Costs of Placing Liquidity in the Interbank Market	105
	Interest Rate Smoothing	105
	Negative Effect on the Equilibrium Interbank Market Rate	106
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