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A critique of the ECB's liquidity policies | 66 comments (66 topical, editorial, 0 hidden)
Re: A critique of the ECB's liquidity policies (4.00 / 3)
I'd say it's more about unhealthy banks scrambling for liquidity.

EONIA, unlike the ECB's MRO or MLF, doesn't require the posting of collateral.

So a bank all of whose clean assets are already pledged at the MRO needs to look at the unsecured interbank market. If they are paying more for Eonia than they would pay for 3-month Euribor it means the Euribor is closed to them.

A key difference between Eonia and Euribor is that Euribor is an offered rate whereas Eonia is the average rate at which actual overnight lending took place.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Carrie (migeru at eurotrib dot com) on Fri Feb 25th, 2011 at 04:54:01 AM EST
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A critique of the ECB's liquidity policies | 66 comments (66 topical, 0 editorial, 0 hidden)
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