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Liquidity management and overnight rate calendar effects: Evidence from German banks


Fecht, Falko; Nyborg, Kjell G; Rocholl, Jörg (2008). Liquidity management and overnight rate calendar effects: Evidence from German banks. North American Journal of Economics and Finance, 19(1):7-21.

Abstract

We document a general pattern in the euro area overnight interbank rate (EONIA) and analyze how German banks compared to other EMU banks respond to these predictable changes in the price for reserve holdings. At the beginning of the maintenance period, when the EONIA is typically above average, we observe that German banks hold substantially less reserves than their daily average required reserves. Thus in contrast to other EMU banks, German banks back load the fulfillment of their reserve requirements over the reserve maintenance period and thereby benefit from the general pattern in the EONIA. Looking at the disaggregate data we find than this is particularly the case for the Landesbanks. We argue that the end of the calender month effect in the EONIA may be driven by a temporary shortage of liquidity, relative to reserve requirements, at the beginning of the maintenance period (which coincides with the end of the calendar month).

We document a general pattern in the euro area overnight interbank rate (EONIA) and analyze how German banks compared to other EMU banks respond to these predictable changes in the price for reserve holdings. At the beginning of the maintenance period, when the EONIA is typically above average, we observe that German banks hold substantially less reserves than their daily average required reserves. Thus in contrast to other EMU banks, German banks back load the fulfillment of their reserve requirements over the reserve maintenance period and thereby benefit from the general pattern in the EONIA. Looking at the disaggregate data we find than this is particularly the case for the Landesbanks. We argue that the end of the calender month effect in the EONIA may be driven by a temporary shortage of liquidity, relative to reserve requirements, at the beginning of the maintenance period (which coincides with the end of the calendar month).

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3 citations in Web of Science®
3 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:1 March 2008
Deposited On:21 May 2015 15:12
Last Modified:05 Apr 2016 19:14
Publisher:Elsevier
ISSN:1062-9408
Publisher DOI:https://doi.org/10.1016/j.najef.2007.09.003
Other Identification Number:merlin-id:11967
Permanent URL: https://doi.org/10.5167/uzh-110683

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