A Structural Model of Central Bank Operations and Bank Intermediation

36 Pages Posted: 6 Apr 2011

See all articles by Ulrich Bindseil

Ulrich Bindseil

European Central Bank (ECB)

Juliusz Jablecki

National Bank of Poland

Date Written: March 8, 2011

Abstract

The banking system is modeled in a closed system of financial accounts, whereby the equilibrium volume of bank intermediation between households and corporates reflects structural parameters such as household preferences, comparative cost structures of heterogeneous banks, loan demand of corporates, and the difference between the borrowing rate and the deposit facility rate of the central bank. The model also allows understanding the link between this difference (the width of the central bank standing facilities corridor) and the stance of monetary policy, and how this link changes during a financial crisis. It is shown how the narrowing of the standing facilities corridor can make more accommodating the stance of monetary policy in a financial crisis.

Keywords: bank intermediation, central bank operations, standing facilities, central bank crisis measures

JEL Classification: E43, E44, G21

Suggested Citation

Bindseil, Ulrich and Jablecki, Juliusz, A Structural Model of Central Bank Operations and Bank Intermediation (March 8, 2011). ECB Working Paper No. 1312, Available at SSRN: https://ssrn.com/abstract=1781030

Ulrich Bindseil (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Juliusz Jablecki

National Bank of Poland ( email )

Poland

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