ECB study measures impact of corridor width on monetary policy


A European Central Bank study, published on Monday, says a wider standing facility corridor, while creating a larger interbank turnover for central banks, leads to greater short-term interest rate volatility.

Ulrich Bindseil and Juliusz Jabłecki, the paper's authors, develop a simple stochastic model using euro area and Hungarian daily data to examine how the width of the standing facilities corridor affects banks' day-to-day liquidity management. The authors note that despite a broad consensus

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