Treasury Bills and/Or Central Bank Bills for Absorbing Surplus Liquidity: The Main Considerations
IMF Working Papers, January 1, 2012
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Bibliographic details
- Authors: Obert Nyawata
- Published: January 1, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463933838.001
Overview
- Title: Treasury Bills and/Or Central Bank Bills for Absorbing Surplus Liquidity: The Main Considerations
- Author: Obert Nyawata
- Publication date: January 1, 2012
- Publication type: IMF Working Papers, Working Paper No. 2012/040, Issue: 040
- Pages: 39
- Volume: 2012
- DOI: https://doi.org/10.5089/9781463933838.001
- Stock No: WPIEA2012040
- ISBN: 9781463933838
- ISSN: 1018-5941
Core finding
- The paper addresses whether central banks should use treasury bills or central bank bills to drain excess liquidity from the banking system.
- Central argument: Treasury bills are the first best option because they generate positive externalities for the financial sector and the rest of the economy.
- Acknowledgement: There are practical reasons that may lead central banks to use central bank bills.
Main considerations guiding the choice
- Operational independence for the central bank.
- Market development.
- Strengthening of the transmission of monetary policy impulses.
Policy implications and recommendations (explicit and implicit from the discussion)
- Prioritize the use of treasury bills where feasible because of their broader positive externalities for financial markets and the economy.
- Weigh practical operational factors that may necessitate the use of central bank bills.
- Ensure choices support market development and improve monetary policy transmission.
- Safeguard or enhance central bank operational independence when designing liquidity-absorbing instruments.
Subjects and keywords (as listed)
- Subject: Banking, Central bank bills, Central banks, Financial institutions, Government debt management, Government securities, Public financial management (PFM), Securities, Treasury bills and bonds
- Keywords: Africa, central bank bank bill, Central bank bills, central bank loss, central bank securities, consolidated public sector, fixed income, Global, Government debt management, government securities, Government securities, interest rate, liquidity management, market fragmentation, market liquidity, monetary management, monetary policy, money market, public finance, Securities, T-bill market, Treasury bills and bonds, WP, yield curve
Source: IMF Working Paper by Obert Nyawata, January 1, 2012.