Danish research examines how central banks can impact market liquidity
Price of liquidity tends to change on days when central bank is operating in markets
Well-functioning money markets should be able to provide liquidity at low cost, but various factors, including central bank actions, can affect market efficiency, according to research published by the National Bank of Denmark.
"On average, banks in need of liquidity pay only a small premium relative to those with ample liquidity," Søren Korsgaard writes in his PhD thesis, which was partly funded by the central bank. However, Korsgaard notes central bank action, high payments activity and other
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