How does the ECB implement monetary policy?

Ejerskov, Steen; Moss, Clara Martin; Stracca, Livio

doi:10.1016/j.jimonfin.2008.05.007

Cited by 6 publications

(7 citation statements)

References 19 publications

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“…The results of Ejerskov et al . () imply that an imbalance of one billion euros implies a variation in the spread of 25 b.p. in the last week of the period and only 2 b.p.…”

Section: Resultsmentioning

confidence: 99%

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Determinants of the EONIA Spread and the Financial Crisis

Soares

Rodrigues

2013

The Manchester School

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To understand the impact of the 2007–9 financial crisis, we model the Euro overnight interest rate average (EONIA) spread against the main reference rate as an exponential general autoregressive conditional heteroskedastic (EGARCH) model. Before the fixed rate full allotment policy of the European Central Bank (ECB) (period 2004–8), we follow a two regime approach, however afterwards (2008–9), a conventional EGARCH seems more adequate. The results suggest a greater difficulty during the turmoil for the ECB to steer the EONIA spread. The liquidity policy and in particular the provision of long‐term liquidity was effective in reducing market volatility.

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“…The results of Ejerskov et al . () imply that an imbalance of one billion euros implies a variation in the spread of 25 b.p. in the last week of the period and only 2 b.p.…”

Section: Resultsmentioning

confidence: 99%

“…Wurtz (2003) only finds a significant effect of the liquidity conditions of the EONIA in the last two weekdays of the period. The results of Ejerskov et al (2008) imply that an imbalance of one billion euros implies a variation in the spread of 25 b.p. in the last week of the period and only 2 b.p.…”

Section: The Period Up To the Full Allotment Policymentioning

confidence: 98%

Determinants of the EONIA Spread and the Financial Crisis

Soares

Rodrigues

2013

The Manchester School

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“…Weekly main refinancing operations (MROs) are of overwhelming importance for the monetary policy implementation of the European Central Bank (ECB). The liquidity supply in MROs should ensure that short-term money market rates closely follow the MRO rates and that their volatility remains well contained, see e. g. Cassola and Morana (2008) and Ejerskov et al (2008). This central aim of monetary policy implementation has never been an easy task.…”

Section: Non-technical Summarymentioning

confidence: 99%

“…However, there is no doubt that the Eurosystem's liquidity policy aims at stabilizing the shortest money market rate, Eonia, to a level close to its main refinancing rates, see e. g. Cassola and Morana (2008) and Ejerskov et al (2008). and relied to an increasing extent upon the Eurosystem's refinancing operations, see e. g. Hauck and Neyer (2010).…”

Section: List Of Tablesmentioning

confidence: 99%

Monetary transmission right from the start: On the information content of the Eurosystem's main refinancing operations

Abbassi¹,

Nautz²

2012

The North American Journal of Economics and Finance

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The Eurosystem's main refinancing operations (MRO) are key for the interbank money market and the monetary transmission process in the euro area. This paper investigates how money market rates respond to the information revealed by various aspects of an MRO auction outcome. Our results confirm that the level of MRO rates governed short-term money market rates before the financial crisis. Since the start of the financial crisis, however, the information content of MRO rates has changed. While the levels of MRO rates have lost much of their pre-crisis significance, the spread between the weighted average and the marginal MRO rate has become an important barometer for the actual situation in the money market during the crisis.Keywords: Monetary Policy Implementation; Central bank auctions; European Central Bank; Money markets and Financial Crisis; JEL classification: E43; E52; E58; D44 Non-technical SummaryThe relation between the Eurosystem's main refinancing (MRO) rates and the money market is key for the monetary transmission process in the euro area. The liquidity supply through MROs should ensure that short-term money market rates closely follow the MRO rates and that their volatility remains well contained. This central aim of monetary policy implementation has never been an easy task. Even before the financial crisis, a puzzling and unintended upward trend in the spread between the European overnight rate (Eonia) and the MRO rates indicated that the monetary transmission mechanism is not sufficiently understood. Since the start of the financial crisis, spreads between the ECB's main refinancing rates and the money market rates have been huge and persistent. In order to shed more light on the very beginning of the monetary transmission process in the euro area, this paper investigated how money market rates respond to new information revealed by an MRO auction outcome before and during the financial crisis.Our results show that the financial crisis changed the information content of MRO auctions in two important ways. First, we find that the information contained in the levels of the MRO rates has significantly declined since the outbreak of the crisis in

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“…La BCE a réagit différemment dans le principe puisqu'elle exige de « noter » préalablement les nantissements, le refinancement étant ensuite automatique. Des études comme celle d 'Ejerskov, Moss et Stracca (2008), portant sur des données anciennes (1999)(2000)(2001)(2002), montrent qu'avant la crise financière, la BCE gérait les opérations d'open market de manière à réduire l'écart entre le taux sur le marché monétaire (EONIA) et son taux d'intervention (MRO à 7 jours), ainsi que la variance de cet écart. Il ne s'agissait que de réduire la variance du taux d'intérêt à court terme, d'éviter qu'il ne soit trop manipulé, ce qu'on appelle le lissage du taux d'intérêt (interest rate smoothing).…”

Section: L'agence De Notation Publiqueunclassified

Le second ordre de la politique économique

Villa¹

2011

Revue De l'OFCE

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How does the ECB implement monetary policy?

Cited by 6 publications

References 19 publications

Determinants of the EONIA Spread and the Financial Crisis

Determinants of the EONIA Spread and the Financial Crisis

Monetary transmission right from the start: On the information content of the Eurosystem's main refinancing operations

Le second ordre de la politique économique

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