Declining Valuations and Equilibrium Bidding Central Bank Refinancing Operations

Ewerhart, Christian; Cassola, Nuno; Valla, Natacha

doi:10.2139/ssrn.1698125

Cited by 52 publications

(37 citation statements)

References 149 publications

(37 reference statements)

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“…Increasing the size (k) of the auction or providing more public information (higher 1/σ 2 θ ) leads to an increased discount. All of these effects are documented features of the ECB euro auctions (Ewerhart, Cassola, and Valla 2010). 12 The results also illustrate the impact of a crisis situation.…”

Section: A Model Of Uniform Price Auctionsmentioning

confidence: 80%

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Asset Auctions, Information, and Liquidity

Vives¹

2010

Journal of the European Economic Association

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A model is presented of a uniform price auction where bidders compete in demand schedules; the model allows for common and private values in the absence of exogenous noise. It is shown how private information yields more market power than the levels seen with full information. Results obtained here are broadly consistent with evidence from asset auctions, may help explain the response of central banks to the crisis, and suggest potential improvements in the auction formats of asset auctions. JEL-Code: D44, D82, G14, E58.

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Section: A Model Of Uniform Price Auctionsmentioning

confidence: 80%

“…5 Bidder i's profits for any such realization are given by 3. As argued by Ewerhart, Cassola, and Valla (2010). 4.…”

Section: A Model Of Uniform Price Auctionsmentioning

confidence: 88%

Asset Auctions, Information, and Liquidity

Vives¹

2010

Journal of the European Economic Association

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“…The 30. See Ewerhart, Cassola, and Valla (2010) and Cassola, Hortaçsu, and Kastl (2013). Heider, Hoerova, and Holthausen (2009).…”

Section: Banks Bidding For Liquidity and The Crisismentioning

confidence: 99%

On the Possibility of Informationally Efficient Markets

Vives

2014

Journal of the European Economic Association

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This paper presents conditions for a resolution of the Grossman–Stiglitz paradox of informationally efficient markets. We display a market with asymmetric information where a privately revealing equilibrium obtains in a competitive framework and where incentives to acquire information are preserved as long as the correlation in traders’ valuations is not too large. The equilibrium is efficient, and the problems associated with fully revealing rational expectations equilibria are precluded without resorting necessarily to noise traders. The robustness of the results to general information structures is established and the effect of market power is examined in a large market approximation to the competitive economy. The model is applied to explain changes in bidding behavior in central bank liquidity auctions in the crisis period. (JEL: D82, D84, G14, E59)

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“…Our paper relates to the theoretical literature on the implementation of monetary policy in the euro area. A first strand of this literature concentrates on over-and underbidding incentives of commercial banks in the Eurosystem's main refinancing operation under different tender procedures (see, for example, Ewerhart, 2002;Nautz and Oechssler, 2003;Ayuso and Repullo, 2003;Bindseil, 2005;Ewerhart, Cassola, andValla, 2010, 2012 These contributions either abstract from the existence of an interbank market or assume that it is frictionless. In contrast to this, the second strand of the literature emphasizes the relevance of frictions in interbank markets.…”

Section: Related Literaturementioning

confidence: 99%

A Model of the Eurosystem’s Operational Framework and the Euro Overnight Interbank Market

Hauck

Neyer

2012

SSRN Journal

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This paper develops a theoretical model which replicates main institutional features of the euro overnight interbank market and the Eurosystem's operational framework which has been in place since September 2008. Main ingredients of the model are frictions in form of participation costs in the interbank market, a refinancing operation with unlimited liquidity supply and two standing facilities offered by the central bank. The model can explain several stylized facts observed during the financial crisis as the decline in interbank borrowing and the interbank rate, the increased borrowing from the Eurosystem and the strong recourse to its deposit facility. Furthermore, we discuss some policy implications.

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Declining Valuations and Equilibrium Bidding Central Bank Refinancing Operations

Abstract: In 2006 all ECB publications will feature a motif taken from the €5 banknote. WO R K I N G PA P E R S E R I E S N O 6 6 8 / A U G U S T 2 0 0 6 C O N T E N T S Abstract 4Non-technical summary 5

Cited by 52 publications

References 149 publications

Asset Auctions, Information, and Liquidity

Asset Auctions, Information, and Liquidity

On the Possibility of Informationally Efficient Markets

A Model of the Eurosystem’s Operational Framework and the Euro Overnight Interbank Market

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