By Prof. Dr. Lukas Menkhoff (auth.)

The longer term ecu imperative financial institution wishes financial coverage tools that have but to be agreed. at this time, the diversity of tools is especially heterogeneous within the power member states. This publication deals a scientific research of the difficulty, contemplating common theoretical arguments in addition to the concrete institutional state of affairs in ecu international locations. Taking the Bundesbank's tools because the start line, their purpose is mentioned opposed to the historical past of expertise in different places. The theoretical and empirical remedy ends up in numerous competing innovations. Taking the 3 targets of financial potency, reasonable pageant and decentralization establishes a robust case for using "standing amenities" and to a lesser expand "reserve requirements", albeit transformed and taken updated.

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For example, around 420 institutions participated in the tenders in both March and April 1994, with an average of 350 institutions receiving allocations. Because not all institutions will participate all the time, the overall number of institutions involved is likely to be higher. 1S In the case of very short-term fine-tuning measures, on the other hand, the Bundesbank only approaches banks which are active players on the money market. Only 59 banks entered a bid for the I-day tender on 27 April 1994, of which 20 were successful.

46, 1994, No. 3. 2 The monetary policy instruments of the European Central Bank 27 money demand, an argument which is lent weight by its money stock targeting, among other things. Table 5. A comparison between the UK and Germany Criteria United Kingdom Monetary policy instruments - Refmancing policy (proportion of central bank assets) - Minimum reserve requirement burden (in % ofGDP) - Open market policy Germany about 2 - 3 % about 20 % 0,1 % about 1% almost exclusively most important Yes None London 8 different centres about 600 includ ing 100 building societies almost 3,700 lnstitutions - Large volume of money market papers - Banking centres / stock exchanges - Number of banks Organization of open market policy - Outright / repurchase - Maturity focus outright purchase < 2 weeks - Typical frequency of intervention - Market partner several times a day - Settlement discount houses (8 in 1988, number is increasing) London repurchase 2 weeks since 1992, plans for extension once a week 300 to 700 banks 9 Land Central Banks However, the Bundesbank has always taken account of other environmental factors in its policy, and has not shied away either from defining its money stock targets mostly as a corridor or from departing from this often enough (see BemankelMishkin, 1993; Neumannlvon Hagen, 1995).

1. Some concensus on refinancing and open market policy instruments presently used in the EU American style - selective tender Dutch style interest rate tender (12) • - volume tender (8) • open market operations (14) Note: The figures in parentheses indicate the numbers of EU-countries practicing these instruments (EMI 1995) deposit facility (6) lending facility (6) marginal facility (10) (standing facilities, 13) refinancing policy instruments N ~ Vl w ~ tXl [ ~ n ~ E ~ g. , IEl 5' $' ~ "O ! g 3 ~ ;i 36 2 The monetary policy instruments ofthe European Central Bank - Refinancing policy performs at least a safety-valve function to satisfy unexpected central bank money needs.

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