Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/211808 
Year of Publication: 
1998
Series/Report no.: 
Bank of Finland Discussion Papers No. 7/1998
Publisher: 
Bank of Finland, Helsinki
Abstract: 
Averaging the reserve requirement is often considered an efficient way to reduce volatility at the very short end of the money market yield curve.The Bank of Finland began to apply an averaging provision at the beginning of October 1995.Notably, the volatility of the overnight rate of interest in the Finnish money markets has increased since the start of the averaging scheme.This paper builds up a simple model of the determination of the overnight rate of interest.The effects of both the averaging scheme and the central bank's reaction to the bids it receives in money market tenders are evaluated against the model.The paper ends with an evaluation of the empirical evidence from the first two years that have passed since the introduction of the averaging provision in Finland.
Subjects: 
money market tenders
minimum reserves
liquidity
averaging
convexity
interest rate volatility
Persistent Identifier of the first edition: 
ISBN: 
951-686-572-0
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.