Working Paper: CEPR ID: DP7789
Authors: Gabriel Prezquirs; Hugo Rodriguez Mendizabal
Abstract: This paper analyzes the role of standing facilities in the determination of the demand for reserves in the overnight money market. In particular, we study how the asymmetric nature of the deposit and lending facilities could be used as a powerful policy tool for the simultaneous control of prices and quantities in the market for daily funds.
Keywords: fine tuning operations; monetary policy implementation; overnight interest rates; standing facilities
JEL Codes: E43; E52; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| position of the main refinancing rate relative to the lending and deposit rates (E52) | demand for excess reserves (E41) |
| position of the main refinancing rate (E52) | control of interest rates and liquidity conditions (E52) |
| asymmetry in the interest rate corridor (E43) | demand for excess reserves (E41) |
| width of the interest rate corridor (E43) | demand for excess reserves (E41) |
| fine-tuning operations at the end of the maintenance period (D25) | demand for excess reserves (E41) |
| asymmetry in the interest rate corridor (E43) | banks' preferences for liquidity (E41) |