Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152571
Authors: 
Bindseil, Ulrich
Year of Publication: 
2002
Series/Report no.: 
ECB Working Paper 137
Abstract: 
Open market operations play a key role in allocating central bank funds to the banking system and thereby to steer short-term interest rates in line with the stance of monetary policy. This note presents some elements of a theory of bidding in central bank tenders in a framework such as the one of the Eurosystem. The ECB has so far used fixed rate tenders and a variant of the variable rate tender, which may be similar to a fixed rate tender depending on market circumstances. In doing so, it faced consecutively an 'under-' and an 'overbidding' issue. The tools developed in this note to understand the bidding behavior of banks in these operations allow revisiting these phenomena and the more general question of the optimal tender procedure and allotment policy.
Subjects: 
central bank liquidity management
Open market operations
tender procedures
JEL: 
D84
E43
E52
Document Type: 
Working Paper

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