Artikel

Demand for Reserves and the Central Bank's Management of Interest Rates

The implementation of monetary policy is prevalently done by interest rate targeting with a short term market rate serving as operational target. The instruments for achieving the operational target are the provision of reserves and the interest rate charged in these transactions. This paper presents a model for the estimation of the demand curve for reserves, derived from the central bank's fixed rate tender auction and the interbank money market. Using data from Switzerland, the slope of the demand curve is estimated. Furthermore, properties of the demand curve such as the slope patterns in the course of a maintenance period and the slope in different monetary regimes are assessed. We find a steeper demand curve towards the end of the maintenance period and an increasing slope when the general interest rate level is high. Further, we investigate the role of the Swiss National Bank's (SNB) interest rate in the fixed rate tender auctions. There is evidence that the SNB uses its auction rate to guide the interbank market rate.

Language
Englisch

Bibliographic citation
Journal: Swiss Journal of Economics and Statistics ; ISSN: 2235-6282 ; Volume: 148 ; Year: 2012 ; Issue: 4 ; Pages: 531-555 ; Heidelberg: Springer

Classification
Wirtschaft
Market Structure, Pricing, and Design: General
Demand for Money
Interest Rates: Determination, Term Structure, and Effects
Monetary Policy
Subject
Implementation of monetary policy
money demand
fixed rate tender auction
repo
Switzerland

Event
Geistige Schöpfung
(who)
Kraenzlin, Sébastien
Schlegel, Martin
Event
Veröffentlichung
(who)
Springer
(where)
Heidelberg
(when)
2012

DOI
doi:10.1007/BF03399377
Handle
Last update
10.03.2025, 11:44 AM CET

Data provider

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Object type

  • Artikel

Associated

  • Kraenzlin, Sébastien
  • Schlegel, Martin
  • Springer

Time of origin

  • 2012

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