BIS paper presents interbank money market model
‘Search-based’ model is designed to reflect interbank markets
Economists outline a model designed to capture the dynamics of the interbank money market in a working paper published on November 20 by the Bank for International Settlements (BIS).
In A search-based model of the interbank money market and monetary policy implementation, Morten Bech and Cyril Monnet use a search mechanism as the core of their model. First, the central bank tenders reserves. Banks then endogenously sort themselves into lenders and borrowers, and bargain over amounts of reserves
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