Banks' Participation in the Eurosystem Auctions and Money Market Integration

Scalia, Antonio; Ordine, Maurizio; Bruno, Giuseppe

doi:10.2139/ssrn.424441

Cited by 22 publications

(10 citation statements)

References 112 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…their reserve fulfilment is low, they should have a stronger incentive to participate in the auction. As in Scalia and Ordine (2003) this is not substantiated by our data. This plausible effect might be obscured in our estimation because we were left with aggregate data to proxy the liquidity position of an individual bank.…”

Section: The Participation Decision Of Bankscontrasting

confidence: 97%

“…First, in line with the evidence provided by Bindseil et al (2004) and Scalia and Ordine (2003) we found no convincing evidence for a winner's curse effect in the Bundesbank repo auctions. Second, in contrast to the ECB's experience the estimated impact of interest rate expectations on banks' bidding in the Bundesbank's repo auctions is only small.…”

Section: Introductionsupporting

confidence: 80%

“…Our paper is closely related to Bindseil et al (2004) and Scalia and Ordine (2003) who analyze banks' bidding behavior in the repo auctions of the ECB. Both studies find that bidder behavior in repo auctions differs from those documented for Treasury bill auctions in two important respects.…”

Section: Introductionmentioning

confidence: 72%

“…This indicates that the demand for reserves in MROs is closely related to the banks' private liquidity needs and thus less influenced by common market conditions. The role of interest rate expectations and rate uncertainty for bidder behavior in central bank auctions is still under debate: For example, Scalia and Ordine (2003) found that higher rate uncertainty may even induce bidders to submit larger bids at higher rates in ECB's MROs suggesting that banks are more concerned about the risk of losing in an auction, not winning.…”

Section: Interest Rate Expectations and Uncertainty In Central Bank Amentioning

confidence: 99%

“…On the one hand, there is the well-known winner's curse effect implying that banks bid more cautious when uncertainty increases. On the other hand, higher uncertainty may also lead to higher bid rates and bid volumes if banks' concern is rather to go out empty handed, see Scalia and Ordine (2003). 8 There may also be the "loser's curse" effect which is related to the repo volume that is auctioned off, see Pesendorfer and Swinkels (1997).…”

Section: Variables and Theoretical Predictionsmentioning

confidence: 99%

See 4 more Smart Citations

Bidder behavior in central bank repo auctions: Evidence from the Bundesbank

Linzert

Nautz

Breitung

2006

Journal of International Financial Markets, Institutions and Mo

View full text Add to dashboard Cite

Section: The Participation Decision Of Bankscontrasting

confidence: 97%

Section: Introductionsupporting

confidence: 80%

Section: Introductionmentioning

confidence: 72%

Section: Interest Rate Expectations and Uncertainty In Central Bank Amentioning

confidence: 99%

Section: Variables and Theoretical Predictionsmentioning

confidence: 99%

See 3 more Smart Citations

Bidder behavior in central bank repo auctions: Evidence from the Bundesbank

Linzert

Nautz

Breitung

2006

Journal of International Financial Markets, Institutions and Mo

View full text Add to dashboard Cite

A model of the Eurosystem's operational framework and the euro overnight interbank market

Hauck

Neyer

2014

European Journal of Political Economy

View full text Add to dashboard Cite

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 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 interbankborrowing and the interbank rate, the increased borrowing from the Eurosystem and the strong recourse to its deposit facility. Furthermore, we discuss some policy implications.

show abstract

Why the Marginal MRO Rate Exceeds the ECB Policy Rate?

Vӓlimӓki

2007

SSRN Journal

View full text Add to dashboard Cite

In the Eurosystem, banks' interest rate expectations should no longer have resulted in a non-zero tender spread, the difference between marginal and minimum price for liquidity, when the ECB reformed its operational framework for monetary policy implementation in March 2004 so that the policy rates remain constant within reserves maintenance periods. Yet, the tender spread was wider in 2005 than in any single year after 2000, when the ECB switched from fixed to variable rate tenders. Parts of the relevant literature have argued that because of the ECB's asymmetric preferences over deviations of the market rates up and down from the policy rate, the shortest euro interest rates persistently exceed the policy rate This paper argues, however, that when the central bank applies a quantity oriented liquidity policy, a positive tender spread may result from money market inefficiencies and banks' risk aversion even if the central bank preferences are symmetric and the markets do not anticipate any changes in the policy rates. In such a case, the driving force behind the tender spread is banks' uncertainty about their individual allotments at the marginal rate for the Eurosystem main refinancing operations (MROs). Furthermore, the allotment uncertainty is shown to be significantly related to the amount of liquidity supplied in each operation. Hence, the expansion in the MRO volumes experienced since 2002 may have had a major contribution to the emergence and observed growth of the tender spread.

show abstract

Banks' Participation in the Eurosystem Auctions and Money Market Integration

Cited by 22 publications

References 112 publications

Bidder behavior in central bank repo auctions: Evidence from the Bundesbank

Bidder behavior in central bank repo auctions: Evidence from the Bundesbank

A model of the Eurosystem's operational framework and the euro overnight interbank market

Why the Marginal MRO Rate Exceeds the ECB Policy Rate?

Contact Info

Product

Resources

About