The Microstructure of the Euro Money Market

By Philipp Hartmann, Michele Manna, A. Manzanares. Social Science Research Network, 2001

224 citations recorded by the source corpus.

This Paper provides the first empirical examination of the microstructure of the euro money market, using tick data from brokers located in six countries. Special emphasis is put on the institutional environment (monetary policy decisions and their implementation, payment systems and private market structures) and its implications for intraday volatility, quoting activity, trading volume and bid-ask spreads in the overnight deposit segment. Volatility and spreads increase right after ECB monetary policy decisions, but market expectations of the interest rate changes were relatively precise during the sample period. Main refinancing operations with the open market are associated with active liquidity re-allocation, little volatility and no signs of market power or adverse selection. Spreads and volatility were high at the end of the reserve maintenance periods and during the year 2000 changeover. Even intraday, overnight rate levels hardly differ across euro area countries, reflecting active arbitrage and a high degree of integration.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/57b5a521957e633ac7d4737bb29361464f3437d5

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Citations in the corpus

The ECB Monetary Policy Strategy and the Money Market (2001, background): “For a systematic account of the performance of the operational framework see Hartmann et al, 2001, Manna et al, 2001 and Perez-Quirós and Rodriguez (2001).”
Lending relationships in the interbank market (2003, unknown): “First for a loan from bank L to bank B on day d, we calculate the difference between the interest rate (i L,B,d ) and the average (market-wide) overnight interest rate on the”
The Impact of ECB Monetary Policy Decisions and Communication on the Yield Curve (2010, background): “(see Bernoth and von Hagen (2004), Hartmann, Manna, and Manzanares (2001), and Sebestyén (2006) for further evidence in different segments of the euro area money market).”
Interest Rate Pass-Through: Empirical Results for the Euro Area (2005, background): “Hartmann et al. (2001) show with thick data that rate expectations by the market have been relatively precise during the period under review, with the absolute expectation error in the EONIA before monetary policy decisions averaging only about 5 basis points.”
Y2K Fears and Safe Haven Trading of the U.S. Dollar (2006, unknown): “16 Indeed, Hartmann et al. (2001) document higher yields on overnight bonds on December 31, 1999 which vanish after January 1, 2000.”