Arbeitspapier

The microstructure of the euro money market

This paper provides the first empirical examination of the microstructure of the euro money market, using tick data from brokers located in 6 countries. Special emphasis is put on the institutional environment (monetary policy decisions and their implementation, payment systems and private market structures) and its implications for intraday volatility, quoting activity, trading volume and bid-ask spreads in the overnight deposit segment. Volatility and spreads increase right after ECB monetary policy decisions, but market expectations of the interest rate changes were relatively precise during the sample period. Main refinancing operations with the open market are associated with active liquidity re-allocation, little volatility and no signs of market power or adverse selection. Spreads and volatility were high at the end of the reserve maintenance periods and during the year 2000 changeover. Even intraday, overnight rate levels hardly differ across euro area countries, reflecting active arbitrage and a high degree of integration

Language
Englisch

Bibliographic citation
Series: ECB Working Paper ; No. 80

Classification
Wirtschaft
Information and Market Efficiency; Event Studies; Insider Trading
Interest Rates: Determination, Term Structure, and Effects
Monetary Policy
Auctions
Subject
euro
Financial market microstructure
high-frequency data
liquidity
monetary policy instruments
money market
overnight deposit rates
payment systems
reserve requirements
trading volume
transaction costs
Volatility

Event
Geistige Schöpfung
(who)
Hartmann, Philipp
Manna, Michele
Manzanares, Andrés
Event
Veröffentlichung
(who)
European Central Bank (ECB)
(where)
Frankfurt a. M.
(when)
2001

Handle
Last update
10.03.2025, 11:42 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Hartmann, Philipp
  • Manna, Michele
  • Manzanares, Andrés
  • European Central Bank (ECB)

Time of origin

  • 2001

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