Central bank forecasts of liquidity factors and the control of short term interest rates
A simple model of the interaction between central bank liquidity management and the inter-bank overnight rate is suggested, which allows analysing the publication offorecasts of liquidity factors by the European Central Bank adopted in June 2000. The paper argues that the main practical advantage of...
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| Format: | Article |
| Language: | English |
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Associazione Economia civile
2002-03-01
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| Series: | PSL Quarterly Review |
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| Online Access: | http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9902/9784 |
| _version_ | 1823996370549211136 |
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| author | Ulrich Bindseil |
| author_facet | Ulrich Bindseil |
| author_sort | Ulrich Bindseil |
| collection | DOAJ |
| description | A simple model of the interaction between central bank liquidity management and the inter-bank overnight rate is suggested, which allows analysing the publication offorecasts of liquidity factors by the European Central Bank adopted in June 2000. The paper argues that the main practical advantage of the publication of theseforecasts is that it makes the signal extraction problem with regard to the centralbank's intentions trivial and hence allows establishing a superior behavioural equilibrium between the central bank and the money market participants. In this equilibrium, the central bank can achieve a better steering of overnight rates than under private autonomous factor forecasts, depending of course also on the quality of liquidity forecasts. It is furthermore shown that the publication of an average of autonomous factors, such as adopted by the ECB, is, at least within the model presented, superior to the separate publication of autonomous factors for each single day. |
| first_indexed | 2024-12-18T17:01:38Z |
| format | Article |
| id | doaj.art-c3b8e31399c54f40b63636652860852e |
| institution | Directory Open Access Journal |
| issn | 2037-3635 2037-3643 |
| language | English |
| last_indexed | 2024-12-18T17:01:38Z |
| publishDate | 2002-03-01 |
| publisher | Associazione Economia civile |
| record_format | Article |
| series | PSL Quarterly Review |
| spelling | doaj.art-c3b8e31399c54f40b63636652860852e2022-12-21T21:00:29ZengAssociazione Economia civilePSL Quarterly Review2037-36352037-36432002-03-01552201337Central bank forecasts of liquidity factors and the control of short term interest ratesUlrich BindseilA simple model of the interaction between central bank liquidity management and the inter-bank overnight rate is suggested, which allows analysing the publication offorecasts of liquidity factors by the European Central Bank adopted in June 2000. The paper argues that the main practical advantage of the publication of theseforecasts is that it makes the signal extraction problem with regard to the centralbank's intentions trivial and hence allows establishing a superior behavioural equilibrium between the central bank and the money market participants. In this equilibrium, the central bank can achieve a better steering of overnight rates than under private autonomous factor forecasts, depending of course also on the quality of liquidity forecasts. It is furthermore shown that the publication of an average of autonomous factors, such as adopted by the ECB, is, at least within the model presented, superior to the separate publication of autonomous factors for each single day.http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9902/9784Interest RatesInterest |
| spellingShingle | Ulrich Bindseil Central bank forecasts of liquidity factors and the control of short term interest rates PSL Quarterly Review Interest Rates Interest |
| title | Central bank forecasts of liquidity factors and the control of short term interest rates |
| title_full | Central bank forecasts of liquidity factors and the control of short term interest rates |
| title_fullStr | Central bank forecasts of liquidity factors and the control of short term interest rates |
| title_full_unstemmed | Central bank forecasts of liquidity factors and the control of short term interest rates |
| title_short | Central bank forecasts of liquidity factors and the control of short term interest rates |
| title_sort | central bank forecasts of liquidity factors and the control of short term interest rates |
| topic | Interest Rates Interest |
| url | http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9902/9784 |
| work_keys_str_mv | AT ulrichbindseil centralbankforecastsofliquidityfactorsandthecontrolofshortterminterestrates |