Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152785
Authors: 
Gaspar, Vítor
Pérez Quirós, Gabriel
Rodríguez Mendizábal, Hugo
Year of Publication: 
2004
Series/Report no.: 
ECB Working Paper 351
Abstract: 
The purpose of this paper is to study the determinants of equilibrium in the market for daily funds. We use the EONIA panel database which includes daily information on the lending rates applied by contributing commercial banks. The data clearly shows an increase in both the time series volatility and the cross section dispersion of rates towards the end of the reserve maintenance period. These increases are highly correlated. With respect to quantities, we find that the volume of trade as well as the use of the standing facilities are also larger at the end of the maintenance period. Our theoretical model shows how the operational framework of monetary policy causes a reduction in the elasticity of the supply of funds by banks throughout the reserve maintenance period. This reduction in the elasticity together with market segmentation and heterogeneity are able to generate distributions for the interest rates and quantities traded with the same properties as in the data.
Subjects: 
Eonia panel
monetary policy instruments
Overnight interest rate
JEL: 
E52
E58
Document Type: 
Working Paper

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