Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/78374
Authors: 
Nautz, Dieter
Oechssler, Jörg
Year of Publication: 
2001
Series/Report no.: 
Bonn Econ Discussion Papers 9/2001
Abstract: 
Weekly repo auctions are the European Central Bank's most important policy instrument. Provided that banks bid seriously, these auctions should determine the liquidity of the banking sector in an efficient and transparent way. However, under the fixed rate tender procedure used until June 2000, banks increasingly overbid which eventually forced the ECB to switch to the variable rate tender format. This paper investigates the overbidding phenomenon from a theoretical and an empirical point of view. Our empirical results confirm the weakness of the fixed rate tender format and indicate that the ECB's liquidity management has significantly improved since the switch to the variable rate system.
Subjects: 
Repo Auctions
JEL: 
E25
D44
Document Type: 
Working Paper

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