Frictions in the interbank market and uncertain liquidity needs: Implications for monetary policy implementation

Arbeitspapier

This paper shows that depending on the distribution of banks' uncertain liquidity needs and on how monetary policy is implemented, frictions in the interbank market may reinforce the effectiveness of monetary policy. These frictions imply that with its lending and deposit facilities the central bank has an additional effective instrument at hand to impose an impact on bank loan supply. While lowering the rate on the lending facility has, taken for itself, an expansionary effect, lowering the rate on the deposit facility has a contractionary effect. This result has interesting implications for monetary policy implementation at the zero lower bound.

Object Details

• ISBN: 978-3-86304-133-5
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DICE Discussion Paper ; No. 134 [rev.]

Classification and Topics

• Classification: Wirtschaft ; Monetary Policy ; Central Banks and Their Policies ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Subject: interbank market ; monetary policy ; monetary policy implementation ; zero lower bound ; loan supply

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bucher, Monika ; Hauck, Achim ; Neyer, Ulrike
• Event: Veröffentlichung
• (who): Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)
• (where): Düsseldorf
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/100031
• Last update: 10.03.2025, 11:43 AM CET