Asymmetric Standing Facilities: An Unexploited Monetary Policy Tool

This paper analyzes the role of standing facilities in the determination of the demand for reserves in the overnight money market. The paper shows how central banks could use the position of the main refinancing rate with respect to the deposit and lending rates as a policy tool to control the demand for excess reserves by depository institutions. Furthermore, it illustrates how the existence of fine-tuning operations at the end of the reserve maintenance period significantly affects the ability of the central bank to influence the demand for reserves.