Frictions in the interbank market and uncertain liquidity needs : implications for monetary policy implementation

Monika Bucher; Achim Hauck; Ulrike Neyer

This paper shows that depending on the distribution of banks' uncertain liquidity needs and on how monetary policy is implemented, frictions in the interbank market may reinforce the effectiveness of monetary policy. The frictions imply that with its lending and deposit facilities the central bank has an additional effective instrument at its disposal to impose an impact on bank loan supply. Lowering the rate on the deposit facility has, taken for itself, a contractionary effect. This result has interesting implications for monetary policy implementation at the zero lower bound.

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Year of publication:	2014
Authors:	Bucher, Monika ; Hauck, Achim ; Neyer, Ulrike
Publisher:	Düsseldorf : DICE
Subject:	interbank market \| monetary policy \| monetary policy implementation \| zero lower bound \| loan supply \| Geldpolitik \| Monetary policy \| Geldmarkt \| Money market \| Theorie \| Theory \| Interbankenmarkt \| Interbank market \| Liquidität \| Liquidity \| Wirkungsanalyse \| Impact assessment \| Zentralbank \| Central bank \| Niedrigzinspolitik \| Low-interest-rate policy \| Finanzkrise \| Financial crisis