Template-type: ReDIF-Paper 1.0
Author-Name: Dr. Lucas Marc Fuhrer
Author-Name-First: Lucas Marc
Author-Name-Last: Fuhrer
Author-Person: pfu165
Author-Name: Dr. Matthias Jüttner
Author-Name-First: Matthias
Author-Name-Last: Jüttner
Author-Name: Jan Wrampelmeyer
Author-Name-First: Jan
Author-Name-Last: Wrampelmeyer
Author-Person: pwr30
Author-Name: Matthias Zwicker
Author-Name-First: Matthias
Author-Name-Last: Zwicker
Title: Reserve tiering and the interbank market
Abstract: Since the financial crisis, major central banks have introduced negative interest rates with the help of tiered reserve remuneration. We theoretically and empirically investigate monetary policy implementation via reserve tiering using a unique bank-level dataset from Switzerland. We find that reserve tiering can successfully be used to steer short-term interest rates. Furthermore, reserve tiering helps maintain sufficient activity in the interbank market, which is key for financial stability and reliable interest rate benchmarks. Due to frictions such as collateral constraints, trading costs, and window dressing around regulatory reporting dates, not only the aggregate level of reserves but also the reserve distribution matters for monetary policy implementation.
Length: 43 pages
Creation-Date: 2021
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2021/working_paper_2021_17
File-Format: text/html
Number: 2021-17
Classification-JEL: E43, E58, G12, G21
Keywords: Interbank market, reserve tiering, negative rates, monetary policy
Handle: RePEc:snb:snbwpa:2021-17