Arbeitspapier
What determines commercial banks' demand for reserves in the interbank market?
In this paper I analyse the determinants of commercial banks' demand for reserves in the interbank market. I first document the pattern in the Eurosystem, where banks deviate from the required reserves balance at the start of the maintenance period only to meet the requirements closer to the settlement day. Using my model I show that this behaviour can be explained by certain trade-related frictions and costs. Examples include potential extra expenses tied to large transactions or the asymmetry between the cost of borrowing and profits from lending. I also find that borrowing decisions can be largely unaffected by current liquidity, which has important implications for the implementation of central bank monetary policy: in order to influence the level of interest rates, the central bank must focus on controlling market expectations.
- ISBN
-
978-952-462-409-1
- Language
-
Englisch
- Bibliographic citation
-
Series: Bank of Finland Research Discussion Papers ; No. 30/2007
- Classification
-
Wirtschaft
Monetary Policy
Central Banks and Their Policies
Interest Rates: Determination, Term Structure, and Effects
- Subject
-
money markets
EONIA
liquidity effect
- Event
-
Geistige Schöpfung
- (who)
-
Kempa, Michal
- Event
-
Veröffentlichung
- (who)
-
Bank of Finland
- (where)
-
Helsinki
- (when)
-
2007
- Handle
- Last update
-
10.03.2025, 11:45 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
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
- Kempa, Michal
- Bank of Finland
Time of origin
- 2007
Other Objects (12)
Contagion in the interbank network: An epidemiological approach
Interbank funds transfer systems: Liquidity needs, counterparty risks and collateral
Financial interlinkages and risk of contagion in the Finnish interbank market
Developing the interbank payment system: Efficiency of public versus private investments
The optimal currency distribution of a central bank's foreign exchange reserves
Markets, reserves and lenders of last resort as sources of bank liquidity
The level of a central bank's international reserves: theory and cross-country analysis
Gridlock resolution in interbank payment systems
Getting better? The effect of the single supervisory mechanism on banks' loan loss reporting and loan loss reserves
Central bank liquidity auction mechanism design and the interbank market
Measuring the interest rate and exchange rate risk of a commercial bank's portfolio
Intraday liquidity needs in a modern interbank payment system: A simulation approach
Contagion in the interbank network: An epidemiological approach
Interbank funds transfer systems: Liquidity needs, counterparty risks and collateral
Financial interlinkages and risk of contagion in the Finnish interbank market
Developing the interbank payment system: Efficiency of public versus private investments
The optimal currency distribution of a central bank's foreign exchange reserves
Markets, reserves and lenders of last resort as sources of bank liquidity
The level of a central bank's international reserves: theory and cross-country analysis
Gridlock resolution in interbank payment systems
Getting better? The effect of the single supervisory mechanism on banks' loan loss reporting and loan loss reserves
Central bank liquidity auction mechanism design and the interbank market
Measuring the interest rate and exchange rate risk of a commercial bank's portfolio
Intraday liquidity needs in a modern interbank payment system: A simulation approach
Contagion in the interbank network: An epidemiological approach
Interbank funds transfer systems: Liquidity needs, counterparty risks and collateral
Financial interlinkages and risk of contagion in the Finnish interbank market
Developing the interbank payment system: Efficiency of public versus private investments
The optimal currency distribution of a central bank's foreign exchange reserves
Markets, reserves and lenders of last resort as sources of bank liquidity
The level of a central bank's international reserves: theory and cross-country analysis
Gridlock resolution in interbank payment systems
Getting better? The effect of the single supervisory mechanism on banks' loan loss reporting and loan loss reserves
Central bank liquidity auction mechanism design and the interbank market
Measuring the interest rate and exchange rate risk of a commercial bank's portfolio