TY - JOUR
T1 - A model of the Eurosystem's operational framework and the euro overnight interbank market
AU - Hauck, Achim
AU - Neyer, Ulrike
N1 - outside of the embargo period
NOTICE: this is the author’s version of a work that was accepted for publication in European Journal of Political Economy. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in European Journal of Political Economy, 34, (2014), DOI: 10.1016/j.ejpoleco.2013.06.010
PY - 2014/6
Y1 - 2014/6
N2 - This paper develops a theoretical model which replicates main institutional features of the euro overnight interbank market and the Eurosystem's operational framework which has been in place since September 2008. Main ingredients of the model are frictions in the form of participation costs in the interbank market, a refinancing operation with unlimited liquidity supply and two standing facilities offered by the central bank. The model can explain several stylized facts observed during the financial crisis as the decline in interbank borrowing and the interbank rate, the increased borrowing from the Eurosystem and the strong recourse to its deposit facility. Furthermore, we discuss some policy implications.
AB - This paper develops a theoretical model which replicates main institutional features of the euro overnight interbank market and the Eurosystem's operational framework which has been in place since September 2008. Main ingredients of the model are frictions in the form of participation costs in the interbank market, a refinancing operation with unlimited liquidity supply and two standing facilities offered by the central bank. The model can explain several stylized facts observed during the financial crisis as the decline in interbank borrowing and the interbank rate, the increased borrowing from the Eurosystem and the strong recourse to its deposit facility. Furthermore, we discuss some policy implications.
U2 - 10.1016/j.ejpoleco.2013.06.010
DO - 10.1016/j.ejpoleco.2013.06.010
M3 - Article
SN - 0176-2680
VL - 34
SP - S65-S82
JO - European Journal of Political Economy
JF - European Journal of Political Economy
IS - Supplement
ER -