The ECB pays a market-based interest rate on required reserves and a lower rate on excess reserves.

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The ECB pays a market-based interest rate on required reserves and a lower rate on excess reserves. Explain why the system is structured this way.

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Money Banking and Financial Markets

ISBN: 978-0078021749

4th edition

Authors: Stephen Cecchetti, Kermit Schoenholtz

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Question Posted: Oct 02, 2014 08:13 AM

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The ECB pays a market-based interest rate on required reserves and a lower rate on excess reserves.

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Paying a marketbased interest rate on required reserves reduces the costs to banks of holding ...View the full answer

Money Banking and Financial Markets

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