The long term refinancing operations of the ECB

Topics: Monetary policy, Interest rate, Central bank Pages: 60 (15899 words) Published: May 22, 2014
WO R K I N G PA P E R S E R I E S
N O. 3 5 9 / M AY 2 0 0 4

THE LONGER
TERM REFINANCING
OPERATIONS OF
THE ECB

by Tobias Linzert, Dieter Nautz
and Ulrich Bindseil

WO R K I N G PA P E R S E R I E S
N O. 3 5 9 / M AY 2 0 0 4

THE LONGER
TERM REFINANCING
OPERATIONS OF
THE ECB 1
by Tobias Linzert 2, Dieter Nautz 3
and Ulrich Bindseil 4

In 2004 all
publications
will carry
a motif taken
from the
€100 banknote.

This paper can be downloaded without charge from
http://www.ecb.int or from the Social Science Research Network electronic library at http://ssrn.com/abstract_id=533028.

1 Financial support by the Deutsche Forschungsgemeinschaft (DFG) through NA-31020102 is gratefully acknowledged.We thank Marco Lagana,Tuomas Välimäki and Benedict Weller, the participants of the ECB seminar and of the CFS workshop on ”Monetary Policy Implementation”, and an anonymous referee for helpful comments and suggestions. Part of the research was undertaken while Tobias Linzert was an intern at the ECB (DG Operations, Operations Analysis Division).The views expressed in this paper are those of the authors and do not necessarily reflect those of the ECB.

2 Goethe University Frankfurt, Department of Economics, Mertonstr. 17-21, 60054 Frankfurt am Main, Germany. Email: linzert@wiwi.uni-frankfurt.de.
3 Goethe University Frankfurt, Department of Economics, Mertonstr. 17-21, 60054 Frankfurt am Main, Germany. Email: nautz@wiwi.uni-frankfurt.de.
4 European Central Bank, Kaiserstrasse 29, D-60311, Frankfurt am Main, Germany. Email: ulrich.bindseil@ecb.int.

© European Central Bank, 2004
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All rights reserved.
Reproduction for educational and noncommercial purposes is permitted provided that the source is acknowledged.
The views expressed in this paper do not
necessarily reflect those of the European
Central Bank.
The statement of purpose for the ECB
Working Paper Series is available from the
ECB website, http://www.ecb.int.
ISSN 1561-0810 (print)
ISSN 1725-2806 (online)

CONTENTS
Abstract

4

Non-technical summary

5

1 Introduction

7

2 The role of LTROs within the operational
framework of the ECB

10

3 Descriptive statistics on LTRO bidding data

11

3.1 A first look at the data

11

3.2 Size and experience effects in LTRO
bidding

17

3.3 Country differences in LTRO bidding
performance

21

4 Variables and theoretical predictions

24

4.1 What to explain? Variables measuring
bidder behavior

24

4.2 And how? Variables explaining
bidder behavior

26

5 A Panel data analysis

30

5.1 The participation decision

30

5.1.1 Size-specific determinants of
LTRO participation

33

5.1.2 Country-specific determinants of
LTRO participation

34

5.2 Bid volume, bid rate, and bid rate
dispersion in LTROs

35

5.2.1 Size-specific bidding behavior

37

5.2.2 Country-specific bidding behavior

39

5.3 Bidding success

39

6 Concluding remarks

42

References

45

A The timing of the LTRO tenders

47

B Figures and tables

48

European Central Bank working paper series

55

ECB
Working Paper Series No. 359
May 2004

3

Abstract
This paper employs individual bidding data to analyze the empirical performance of the longer term refinancing operations (LTROs) of the European Central Bank (ECB). We investigate how banks’ bidding behavior is related to a series of exogenous variables such as collateral costs, interest rate expectations, market volatility and to individual bank characteristics like country of origin, size, and experience. Panel regressions reveal that a bank’s bidding depends on bank characteristics. Yet, different bidding behavior generally does not translate into...

References: Jofre-Bonet, M. and Pesendorfer, M.: 2003, Estimation of a dynamic auction game,
Econometrica 71(5), 1443–1489.
Figure 11:
Notes: This Figure was taken from ECB (2000) and shows the specific timing of ECB’s
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