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Payment system design can encourage intraday liquidity efficiency
Efficient allocation of bank reserves improves central bank balance sheet efficiency. Frictions in such redistribution can affect monetary policy implementation.
Domestic banks are inelastic providers of marginal funding to repo markets
As system liquidity declines and rates of return rise, new types of participants enter repo markets as lenders, although some may not be able to reliably deploy cash in the early morning when markets are most active. The short tenor and early-morning timing of most private market repo transactions make domestic banks especially inelastic lenders in response to unanticipated demands for lending