Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152514
Authors: 
Hartmann, Philipp
Manna, Michele
Manzanares, Andrés
Year of Publication: 
2001
Series/Report no.: 
ECB Working Paper 80
Abstract: 
This paper provides the first empirical examination of the microstructure of the euro money market, using tick data from brokers located in 6 countries. Special emphasis is put on the institutional environment (monetary policy decisions and their implementation, payment systems and private market structures) and its implications for intraday volatility, quoting activity, trading volume and bid-ask spreads in the overnight deposit segment. Volatility and spreads increase right after ECB monetary policy decisions, but market expectations of the interest rate changes were relatively precise during the sample period. Main refinancing operations with the open market are associated with active liquidity re-allocation, little volatility and no signs of market power or adverse selection. Spreads and volatility were high at the end of the reserve maintenance periods and during the year 2000 changeover. Even intraday, overnight rate levels hardly differ across euro area countries, reflecting active arbitrage and a high degree of integration
Subjects: 
euro
Financial market microstructure
high-frequency data
liquidity
monetary policy instruments
money market
overnight deposit rates
payment systems
reserve requirements
trading volume
transaction costs
Volatility
JEL: 
G14
E43
E52
D44
Document Type: 
Working Paper

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