Arbeitspapier
Equilibrium and inefficiency in fixed rate tenders
The fixed rate tender is one of the main procedural formats relied upon by central banks in their implementation of monetary policy. This fact stands in a somewhat puzzling contrast to the prevalent view in the theoretical literature that the procedure, by fixing interest rate and quantity at the same time, does not allow a strategic equilibrium. We show that an equilibrium exists under general conditions even if bidders expect true demand to exceed supply on average. The outcome is typically inefficient. It is argued that the fixed rate tender, in comparison to other tender formats, may be an appropriate instrument for central bank liquidity management when market conditions are sufficiently calm.
- Language
-
Englisch
- Bibliographic citation
-
Series: ECB Working Paper ; No. 554
- Classification
-
Wirtschaft
Auctions
Monetary Policy
- Subject
-
equilibrium
Fixed rate tenders
inefficiency
rationing
Offenmarktpolitik
Zinspolitik
Auktionstheorie
Ungleichgewichtsökonomie
Theorie
- Event
-
Geistige Schöpfung
- (who)
-
Ewerhart, Christian
Cassola, Nuno
Valla, Natacha
- Event
-
Veröffentlichung
- (who)
-
European Central Bank (ECB)
- (where)
-
Frankfurt a. M.
- (when)
-
2005
- Handle
- Last update
-
10.03.2025, 11:45 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Ewerhart, Christian
- Cassola, Nuno
- Valla, Natacha
- European Central Bank (ECB)
Time of origin
- 2005
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