Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/229097
Authors: 
Corradin, Stefano
Eisenschmidt, Jens
Hoerova, Marie
Linzert, Tobias
Schepens, Glenn
Sigaux, Jean-David
Year of Publication: 
2020
Series/Report no.: 
ECB Working Paper No. 2483
Abstract: 
This paper analyses money market developments since 2005, and examines factors that have affected money market functioning. We consider several metrics of activity in both secured and unsecured euro area money markets, and study interactions with new Basel III regulations and with central bank policies (liquidity provision, asset purchases and the Securities Lending Programme). Using aggregate data, we document that, prior to 2015, heightened financial market volatility coincided with worsening money market conditions, while higher central bank liquidity provision was associated with reduced money market stress. After 2015, the evidence is consistent with central bank asset purchases inducing scarcity effects in some money market segments, and with active securities lending supporting money market functioning. Using transactions-level money market data combined with supervisory data, we further document that the leverage ratio regulation impacts money markets at quarter-ends due to "window-dressing" effects, reducing money market volumes and rates. We also consider the macroeconomic impact of changing money market conditions, finding that the impact depends on whether frictions originate in secured or unsecured markets and on central bank policies in place.
Subjects: 
Money markets
asset purchases
securities lending
leverage ratio
liquidity coverageratio
JEL: 
E44
E58
G12
G20
G28
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4400-7
Document Type: 
Working Paper

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