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Michele Manna

1 October 2001
WORKING PAPER SERIES - No. 80
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Abstract
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
JEL Code
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
D44 : Microeconomics→Market Structure and Pricing→Auctions
1 October 2002
WORKING PAPER SERIES - No. 186
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Abstract
This paper uses the variability of money market rates to compare the conduct of the central bank's key market operation as a fixed-rate tender (FRT) or a variable-rate tender (VRT). Nowadays, leading central banks generally use FRTs or other approaches (e.g. target rates) which yield step changes in the policy rate, as opposed to the more piecemeal, but also more noisy changes resulting from the VRT rate. Given the central bankers' preference for stable money market conditions, FRTs should thus remain associated with lower market variability. In fact, daily data for the German overnight and three-month rates from 1989 to 1998, when the Bundesbank alternated FRTs and VRTs, indicate that the average variability of money market rates is broadly the same under the two tender procedures. A small model shows that this finding holds true under rather general conditions, and is not only a feature of the experience in Germany.
JEL Code
E4 : Macroeconomics and Monetary Economics→Money and Interest Rates
E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
G2 : Financial Economics→Financial Institutions and Services
N2 : Economic History→Financial Markets and Institutions
27 January 2004
WORKING PAPER SERIES - No. 300
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Abstract
This paper discusses a wide range of indicators of the degree of integration of the euro area banking system. It is concerned with volume data, a less developed field of research compared with studies on prices/rates. We first set out a methodological framework, a mixture of elementary and more sophisticated statistics which can also be used in other contexts and datasets. We then apply this framework to unconsolidated balance sheet data of banks, aggregated at the national level. The paper offers three main empirical conclusions. First, within the euro area the gap between the cross-border banking activity in wholesale and retail markets is widening. Second, at the same time, with the exception of the home bias, even in retail markets there is increasing neutrality towards the location of the counterparty. Third, following a moderate decline in the wake of EMU, London is once again gaining market shares.
JEL Code
C43 : Mathematical and Quantitative Methods→Econometric and Statistical Methods: Special Topics→Index Numbers and Aggregation
D40 : Microeconomics→Market Structure and Pricing→General
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
L11 : Industrial Organization→Market Structure, Firm Strategy, and Market Performance→Production, Pricing, and Market Structure, Size Distribution of Firms