Why Did the Banks Overbid? An Empirical Model of the Fixed Rate Tenders of the European Central Bank

• Juan Ayuso ^[2] ; Rafael Repullo ^[1]
  1. [1] Centro de Estudios Monetarios y Financieros

     Centro de Estudios Monetarios y Financieros

     Madrid, España

     
  2. [2] Banco de España
• Localización: Documentos de Trabajo ( CEMFI ), Nº. 4 (Working Paper No. 0104, March 2001), 2001
• Idioma: inglés
• Enlaces
  • Texto completo (pdf)
• Resumen

  • This paper tests two hypotheses for the overbidding behavior of the banks in the …xed rate tenders conducted by the European Central Bank (ECB) from January 1999 until June 2000. One hypothesis attributes the overbidding to the expectations of a future tightening of monetary policy, while the other attributes it to the liquidity allotment decisions of the ECB. The model is estimated with individual bidding data of the Spanish banks, and also with aggregate bidding data of all Spanish banks and all banks in the euro area. The empirical results provide support for the second hypothesis.