A Search-Based Model of the Interbank Money Market and Monetary Policy Implementation

Bech, Morten; Monnet, Cyril (2016). A Search-Based Model of the Interbank Money Market and Monetary Policy Implementation. Journal of economic theory, 164, pp. 32-67. Elsevier 10.1016/j.jet.2015.08.007

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We present a search-based model of the interbank money market and monetary policy implementation. Banks are subject to reserve requirements and the central bank tenders reserves. Interbank payments redistribute holdings and banks trade with each other in a decentralized (over-the-counter) market. The central bank provides standing facilities where banks can either deposit surpluses or borrow to cover shortfalls of reserves overnight. The model provides insights on liquidity, trading volume, and rate dispersion in the interbank market – features largely absent from the canonical models in the tradition of Poole (1968) – and fits a number of stylized facts for the Eurosystem observed during the recent period of unconventional monetary policies. Moreover, it provides insights on the implications of different market structures.

Item Type:

Journal Article (Original Article)

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Monnet, Cyril

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

ISSN:

0022-0531

Publisher:

Elsevier

Language:

English

Submitter:

Eva Marina Zuberbühler

Date Deposited:

11 Jul 2017 12:24

Last Modified:

27 Dec 2018 14:08

Publisher DOI:

10.1016/j.jet.2015.08.007

Additional Information:

JELclassification: G21; E5

Uncontrolled Keywords:

Interbank market; Monetary policy implementation; Unconventional monetary policy

BORIS DOI:

10.7892/boris.93163

URI:

https://boris.unibe.ch/id/eprint/93163

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