Excess Reserves and the Implementation of Monetary Policy of the ECB

42 Pages Posted: 30 Nov 2004

See all articles by Ulrich Bindseil

Ulrich Bindseil

European Central Bank (ECB)

Gonzalo Camba-Mendez

European Central Bank (ECB)

Astrid Hirsch

European Central Bank (ECB)

Benedict Weller

European Central Bank (ECB)

Date Written: May 2004

Abstract

This paper explains to what extent excess reserves are and should be relevant today in the implementation of monetary policy, focusing on the specific case of the operational framework of the Eurosystem. In particular, this paper studies the impact that changes to the operational framework for monetary policy implementation have on the level and volatility of excess reserves. A 'transaction costs' model that replicates the rather specific intra-reserve maintenance period pattern of excess reserves in the euro area is developed. Simulation results presented not only show that excess reserves may increase considerably under some changes to the operational framework, but also that their volatility and hence unpredictability could.

Keywords: excess reserves, monetary policy implementation, liquidity management

JEL Classification: E52, E58

Suggested Citation

Bindseil, Ulrich and Camba-Mendez, Gonzalo and Hirsch, Astrid and Weller, Benedict, Excess Reserves and the Implementation of Monetary Policy of the ECB (May 2004). Available at SSRN: https://ssrn.com/abstract=533106

Ulrich Bindseil (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Gonzalo Camba-Mendez

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
0049 69 13440 (Phone)
0044 69 1344 6000 (Fax)

Astrid Hirsch

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Benedict Weller

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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