Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/88221
Authors: 
Neyer, Ulrike
Year of Publication: 
2007
Series/Report no.: 
ROME Discussion Paper Series 07-05
Abstract: 
This paper shows that remunerating required reserves can increase the flexibility of monetary policy. The remuneration at the current repo rate implies constant net marginal interest costs of holding required reserves. This allows the central bank also to change the rate also within a reserve maintenance period without inducing a problematic reserve shifting on behalf of the banks. In the euro area, required reserves are remunerated at an average rate. Therefore, the way in which reserves are remunerated has to be changed in order to make use of the advantage of a higher flexibility of monetary policy.
Subjects: 
Monetary policy
monetary policy instruments
required reserves
interbank market
Eurosystem
JEL: 
E41
E52
Document Type: 
Working Paper

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