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A Simple Model of Interbank Trading with Tiered Remuneration

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  • Toshifumi Nakamura

Abstract

A negative interest rate policy is often accompanied by tiered remuneration, which allows exemption from negative rates. This study proposes a basic model of interest rates in an interbank market with a tiering system. The results largely mirror actual market developments in late 2019, when the European Central Bank introduced the tiering system and the Switzerland National Bank modified it.

Suggested Citation

  • Toshifumi Nakamura, 2021. "A Simple Model of Interbank Trading with Tiered Remuneration," Applied Economics and Finance, Redfame publishing, vol. 8(1), pages 74-77, January.
    • Handle: RePEc:rfa:aefjnl:v:8:y:2021:i:1:p:74-77
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    References listed on IDEAS

    as
    1. Michael Boutros & Jonathan Witmer, 2017. "Monetary Policy Implementation in a Negative Rate Environment," Staff Working Papers 17-25, Bank of Canada.
    2. Gara Afonso & Roc Armenter & Benjamin Lester, 2019. "A Model of the Federal Funds Market: Yesterday, Today, and Tomorrow," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 33, pages 177-204, July.
    3. William Poole, 1968. "Commercial Bank Reserve Management In A Stochastic Model: Implications For Monetary Policy," Journal of Finance, American Finance Association, vol. 23(5), pages 769-791, December.
    4. Bindseil, Ulrich, 2004. "The operational target of monetary policy and the rise and fall of reserve position doctrine," Working Paper Series 372, European Central Bank.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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