German researchers present indicator of interbank market stress


Central banks can use banks' bidding behaviour in the Eurosystem's weekly refinancing operations as an indicator of whether they are experiencing a liquidity squeeze, according to a discussion paper published by the Deutsche Bundesbank last week.

In How stressed are banks in the interbank market? Puriya Abbassi, Falko Fecht and Patrick Weber argue that, provided a bank has sufficient eligible collateral, the price it is willing to pay for reserves in these weekly operations "should reflect its

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