A Market for Intra-day Funds: Does it Have Implications for Monetary Policy?

Working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
Published on 02 April 1996

Working Paper No. 46
By Spencer Dale and Marco Rossi

The United Kingdom is due to move to a system of real-time gross settlement (RTGS) later this year. This in theory could lead to the creation of a market for intra-day funds and an extention of the yield curve back beyond its current shortest maturity of one day. This paper considers the form a market of this sort might take and provides an explicit derivation of the intra-day yield curve. The paper also considers the potential for spillover between the provision of intra-day liquidity to support the RTGS operation and a central bank's ability to implement monetary policy via its control over short-term interest rates.

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