Neyer The Design of the Eurosystem's Monetary Policy Instruments

1. Auflage 2007
ISBN: 978-3-7908-1978-6
Verlag: Physica-Verlag
Format: PDF
Kopierschutz: Wasserzeichen (»Systemvoraussetzungen)

E-Book, Englisch, 179 Seiten

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.

Autoren/Hrsg.

Neyer, Ulrike

Inhaltsverzeichnis

1;Preface;6
2;Contents;7
2.1;1 Introduction 2 Monetary;7
2.2;Policy Instruments of the Eurosystem;7
2.3;3 Stylized Facts and First Explanations;7
2.4;4 Base Model: Banks’ Liquidity Management and;7
2.5;Interbank Market Equilibrium;7
2.6;5 Remuneration of Required Reserves at the Current;8
2.7;Repo Rate;8
2.8;6 Remuneration of Required Reserves at an Average;8
2.9;Rate;8
2.10;7 Overlapping Maturities of Central Bank Credits;9
2.11;8 Implications for the Eurosystem’s Operational;9
2.12;Framework;9
2.13;9 Summary;9
2.14;Appendix;9
2.15;References;9
3;1 Introduction;10
3.1;Aim of this Work;12
3.2;Theoretical Analysis and Main Results;12
3.3;Related Literature;15
3.4;Contribution to the Literature;16
3.5;Outline;16
4;2 Monetary Policy Instruments of the Eurosystem;18
4.1;2.1 Introduction;18
4.2;2.2 Guiding Principles Behind the Design of the Eurosystem’s Monetary Policy Instruments;20
4.3;2.3 Minimum Reserve System;20
4.4;2.4 Open Market Operations;22
4.4.1;Under- and Overbidding Behaviour: Definition;22
4.4.2;Collateral Framework;23
4.5;2.5 Standing Facilities;26
4.6;2.6 Summary;27
5;3 Stylized Facts and First Explanations;28
5.1;3.1 The Overnight Rate;28
5.2;3.2 Bidding Behaviour in the Main Refinancing Operations;32
5.3;3.3 Fulfilling of Required Reserves;39
5.4;3.4 Summary;41
6;4 Base Model: Banks’ Liquidity Management and Interbank Market Equilibrium;42
6.1;4.1 Introduction;42
6.2;4.2 Optimal Liquidity Management of a Single Bank;43
6.3;4.3 Interbank Market Equilibrium;46
6.4;4.4 Summary;53
7;5 Remuneration of Required Reserves at the Current Repo Rate;55
7.1;5.1 Introduction;55
7.2;5.2 Optimal Liquidity Management of a Single Bank;56
7.3;5.3 Interbank Market Equilibrium and Final Results;62
7.3.1;Equilibrium Interbank Market Rate;63
7.3.2;Optimal Liquidity Management: Final Results;63
7.3.3;Equilibrium Interbank Market Rate: Discussion;65
7.3.4;The Impact of Monetary Policy Impulses;67
7.3.5;Equilibrium Interbank Market Rate;69
7.3.6;Optimal Liquidity Management: Final Results;70
7.3.7;Equilibrium Interbank Market Rate: Discussion;72
7.3.8;The Impact of Monetary Policy Impulses;75
7.4;5.4 Summary;76
8;6 Remuneration of Required Reserves at an Average Rate;79
8.1;6.1 Introduction;79
8.2;6.2 Optimal Liquidity Management of a Single Bank;79
8.3;6.3 Interbank Market Equilibrium and Final Results;87
8.3.1;Equilibrium Interbank Market Rate;87
8.3.2;Optimal Liquidity Management: Final Results;88
8.3.3;Equilibrium Interbank Market Rate: Discussion;90
8.3.4;The Impact of Monetary Policy Impulses;93
8.3.5;Equilibrium Interbank Market Rate;94
8.3.6;Final Results for the Optimal Liquidity Management if the Repo Rate Is Cut;95
8.3.7;Optimal Intertemporal Allocation of Required Reserves;97
8.3.8;Optimal Borrowing from the Monetary Authority;98
8.3.9;Optimal Transactions in the Interbank Market;99
8.3.10;Final Results for the Optimal Liquidity Management if the Repo Rate Is Raised;101
8.3.11;Optimal Intertemporal Allocation of Required Reserves;102
8.3.12;Optimal Borrowing from the Monetary Authority;102
8.3.13;Optimal Transactions in the Interbank Market;104
8.3.14;Equilibrium Interbank Market Rate: Discussion;104
8.3.15;Marginal Costs of Placing Liquidity in the Interbank Market;105
8.3.16;Interest Rate Smoothing;105
8.3.17;Negative Effect on the Equilibrium Interbank Market Rate;106
8.3.18;Spread between the Interbank Market Rate and the Repo;107
8.3.19;Rate;107
8.3.20;The Impact of Monetary Policy Impulses;107
8.3.21;First Group;108
8.3.22;Second Group;108
8.3.23;Third Group;109
8.3.24;Fourth Group;109
8.4;6.4 Summary;114
9;7 Overlapping Maturities of Central Bank Credits;116
9.1;7.1 Introduction;116
9.2;7.2 Optimal Liquidity Management of a Single Bank;117
9.3;7.3 Equilibrium in the Interbank Market and Final Results;124
9.3.1;Equilibrium Interbank Market Rate;125
9.3.2;Optimal Liquidity Management: Final Results;125
9.3.3;Equilibrium Interbank Market Rate: Discussion;128
9.3.4;Marginal Costs of Placing Liquidity in the Interbank Market;128
9.3.5;Change in the Repo Rate;130
9.3.6;Impact of Monetary Policy Impulses;131
9.3.7;Equilibrium Interbank Market Rate;132
9.3.8;Final Results for the Optimal Liquidity Management if the Repo Rate Is Raised or Left Unchanged;133
9.3.9;Optimal Allocation of Required Reserves;134
9.3.10;Optimal Borrowing from the Central Bank;135
9.3.11;Optimal Transactions in the Interbank Market;136
9.3.12;Final Results for the Optimal Liquidity Management if the Repo Rate Is Cut;136
9.3.13;Optimal Borrowing from the Central Bank;138
9.3.14;Optimal Allocation of Required Reserves;139
9.3.15;Why will the overlapping maturities reinforce the problem;139
9.3.16;of uneven provisions of required reserves if;139
9.3.17;Why will banks fulfil their reserve requirements smoothly if;140
9.3.18;Why may the postponing effect be dampened in the in-terval;141
9.3.19;Slope of the;141
9.3.20;curves.;141
9.3.21;Optimal Transactions in the Interbank Market;142
9.3.22;Equilibrium Interbank Market Rate: Discussion;143
9.3.23;Marginal Costs of Placing Liquidity in the Interbank Market;143
9.3.24;The Impact of a Change in the Repo Rate within the Reserve;144
9.3.25;Maintenance Period;144
9.3.26;Spread between the Interbank Market Rate and the Repo;145
9.3.27;Rate;145
9.3.28;The Impact of Monetary Policy Impulses;146
9.3.29;First Group;147
9.3.30;Second Group;147
9.3.31;Third Group;148
9.3.32;Fourth Group;148
9.3.33;Introduction;152
9.3.34;Equilibrium Interbank Market Rate;152
9.3.35;Optimal Liquidity Management;154
9.3.36;Impact of Monetary Policy Impulses;156
9.3.37;Summary;157
9.4;7.4 Summary;160
10;8 Implications for the Eurosystem’s Operational Framework;162
10.1;8.1 Interbank Market Rate;162
10.2;8.2 Current Rate Model: Fulfils Requirements Most Closely;163
10.2.1;Requirements;163
10.2.2;In Which Model Are the Requirements Most Closely Fulfilled?;164
10.2.3;Drawbacks to Accept;165
10.3;8.3 Evaluation of the Changes to the Eurosystem’s Operational Framework;165
10.3.1;Right Decision;165
10.3.2;Is the Under- and Overbidding Problem Solved Under the New Framework?;168
10.4;8.4 Suggestions for Further Improvements to the Eurosystem’s Operational Framework;171
10.4.1;Remuneration of Required Reserves at the Current Rate on the Main Refinancing Operations;171
10.4.2;Collateralization of the Main Refinancing Operations?;172
10.5;8.5 Summary;173
11;9 Summary;176
12;Appendix;179
13;Numerical Example: Effects of a Change in the Repo Rate on the Equilibrium Interbank Market Rate;179
14;References;181