Monetary transmission right from the start: On the information content of the Eurosystem's main refinancing operations

Abbassi, Puriya; Nautz, Dieter

doi:10.1016/j.najef.2011.11.002

Cited by 3 publications

(4 citation statements)

References 41 publications

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“…However, with the announcement of the full allotment corporate money market deposit rates dropped to and remained at the lower bound of the interest rate corridor as a direct effect of excess liquidity in the market (Cassola, Holthausen and Würtz, 2009;Furfine, 2011). This might cause problems as the ECB is not able to establish its desired key policy rate in the market any more (Abbassi and Nautz, 2010;Beirne, 2012;Coeuré, 2012). Figure 2.B also depicts the strong negative relation between corporate money market deposit spreads and aggregate bank liquidity.…”

Section: A Sample Selectionmentioning

confidence: 99%

Does the Lack of Financial Stability Impair the Transmission of Monetary Policy?

Acharya¹,

Imbierowicz²,

Steffen³

et al. 2019

SSRN Journal

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We investigate the transmission of central bank liquidity to bank deposit and loan spreads of European firms over the January 2006 to June 2010 period. When the European Central Bank (ECB) allocated liquidity to banks in a competitive tender at the beginning of the crisis, higher "aggregate" central bank liquidity (i.e. the total liquidity in the banking system that is held at the ECB) reduces bank deposit rates of low risk banks but has no effect on deposit rates of high risk banks or on corporate loan spreads of high or low risk banks. After the ECB started to fully allot all liquidity requested by banks via its refinancing operations on October 8, 2008, an increase in liquidity decreases deposit rates of both high and low risk banks. While loan spreads of low risk banks decrease, those of high risk banks remain unchanged also under full allotment of liquidity. We find that borrowers of high risk banks refinance term loans drawing down loan commitments. They have lower payouts, lower capital expenditures and lower asset growth compared with borrowers of low risk banks. Our results suggest a differential transmission of central bank liquidity of low versus high risk banks, and an impaired transmission to corporate borrowers of high risk banks.

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Section: A Sample Selectionmentioning

confidence: 99%

Does the Lack of Financial Stability Impair the Transmission of Monetary Policy?

Acharya¹,

Imbierowicz²,

Steffen³

et al. 2019

SSRN Journal

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“…If the ARCH test (Engle 1982) for standardized residuals revealed heteroscedasticity, we modeled the nonlinear dependencies via SV model (see the ''Appendix'' for details). Based upon the findings in the literature (Wuertz 2003;Linzert and Schmidt 2008;Schianchi and Verga 2006;Abbassi and Nautz 2010), as well as our previous findings (Kliber et al 2011;Kliber and Płuciennik 2011a) we decided to use the following explanatory variables:…”

Section: Analysis Of the Spread Dynamicsmentioning

confidence: 99%

POLONIA dynamics during the years 2006–2012 and the effectiveness of the monetary Policy of the National Bank of Poland

Kliber

Płuciennik

et al. 2015

Empirica

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In the study we investigate the effectiveness of the National Bank of Poland in counteracting the negative results of the financial crisis in the Polish interbank market. The situation was exceptional in a sense, that during the period of the financial crisis the Polish interbank market experienced liquidity surplus, and the main problem of the central bank was to regain confidence among commercial banks and stimulate interbank transactions. We concentrate on the spread between the rate of overnight interbank loans and the reference rate and based upon its dynamics we assess the monetary policy of the Polish central bank. Using econometric techniques we study how the central bank influenced the spread, when its control over it weakened and when was it strengthened. The study is supported by the results of the survey directed to the headquarters of commercial banks. We conclude that the ability of the central bank to control overnight rate wasThe views in this paper should be regarded as those of the author, and do not necessarily reflect those of the National Bank of Poland. temporarily lost during the first phases of the financial crisis, but gradually regained after implementation of the confidence pact.The aim of the research was to assess the ability of the Polish central bank to control the rate of overnight loans in the Polish interbank market and conduct its monetary policy during the confidence crisis, as well as facing the liquidity surplus. The Polish interbank market is special in a sense that liquidity surplus has been present there even since 1994 (National Bank of Poland 2009). However, together with the outbreak of the financial crisis, the confidence in the Polish interbank market declined drastically. Commercial banks preferred to accumulate liquidity surplus and performed almost no interbank transactions of maturity longer than 7 days. Banks preferred to keep their surplus on their current accounts with the central bank or in the form of deposit facility, and they significantly limited participation in the 7-day open market operations conducted by the National Bank of Poland (NBP) (National Bank of Poland 2009). The latter resulted in the so called underbidding (i.e. the situation during the tenders for the NBP bills, when the banks' total bid is lower than the supply offered by the central bank). As a consequence, the effectiveness of the central bank in stabilization of the market rates, what is one of the main goals of the monetary policy, diminished significantly.Our goal was to assess the effectiveness of the monetary policy of the Polish central bank, using econometric methods, as well as with respect to the results of the survey, sent to the head-quarters of the Polish commercial banks. The problem of assessing the effectiveness of the stabilization policy of central banks using econometric methods is also rather new in literature. Panigirtzoglou et al. (2000) studied the effectiveness of controlling the interbank rates through the key interest rates of the central banks of Grea...

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“…Examples of studies of the financial crisis periods of the Eurosystem are the studies of Abbassi and Nautz (2012), Beirne (2012), Beirne et al (2013), and Soares and Rodrigues (2013). In studies of the crisis, it is quite clear that more attention was paid to factors related to risk.…”

Section: Literature Reviewmentioning

confidence: 99%

“…In studies of the crisis, it is quite clear that more attention was paid to factors related to risk. Abbassi and Nautz (2012) used the error correction model, whereas Beirne (2012) analysed two kinds of models, namely the linear regression model and the vector autoregressive model. Beirne et al (2013) applied the regression model in parallel with the stochastic volatility model, not only for the Eurosystem but also for the UK.…”

Section: Literature Reviewmentioning

confidence: 99%

Monetary policy in steering the EONIA and POLONIA rates in the Eurosystem and Poland: a comparative analysis

Fiszeder

Pietryka

2017

Empir Econ

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The effectiveness of the monetary policies of the European Central Bank (ECB) and the Narodowy Bank Polski (NBP) is compared directly in terms of influencing the spread between the interbank overnight rate and the main rates of the central banks during periods of different economic conditions, i.e. the global financial crisis of 2008, the European sovereign debt crisis and the period of relative stability. Three categories of determinants of the Euro Overnight Index Average/Polish Overnight Index Average (EONIA/POLONIA) spreads are considered: (1) monetary policy instruments such as open market operations, standing facilities and minimum reserve requirements; (2) measures of liquidity conditions; and (3) market expectations and risk measures. Applying the ARFIMA-GARCH models, we show that the statistical and economic properties of the EONIA and POLONIA spreads are quite different. The EONIA spread has a long memory while the POLONIA spread is characterized by a short memory. This difference is important from the viewpoint of a stabilizing monetary policy. The impact of shocks on the future levels of the spread was stronger for the POLONIA spread, but it was short-lived in comparison with the EONIA spread. Most of the analysed variables significantly influenced the spreads during the financial crisis, while the biggest differences in the impact of determinants between the EONIA and POLONIA spreads occurred during the period of relative stability. Substantial differences also exist between the volatilities of both spreads.

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Monetary transmission right from the start: On the information content of the Eurosystem's main refinancing operations

Cited by 3 publications

References 41 publications

Does the Lack of Financial Stability Impair the Transmission of Monetary Policy?

Does the Lack of Financial Stability Impair the Transmission of Monetary Policy?

POLONIA dynamics during the years 2006–2012 and the effectiveness of the monetary Policy of the National Bank of Poland

Monetary policy in steering the EONIA and POLONIA rates in the Eurosystem and Poland: a comparative analysis

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