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The authors analyze the impact of the recent financial market crisis on the Euro OverNight Index Average (EONIA) and interbank market trading and assess the effectiveness of the ECB liquidity policy between 07/2007 - 08/2008. They extend the model of [QM06] by incorporating the microstructure of the EONIA market including the ECB fine-tuning operation on the last day of the Maintenance Period (MP) and banks' daily excess liquidity, giving insight into banks' trading behavior characterized by an endogenous regime-switch and suggesting an efficient procedure to simulate the entire MP, and proposing a model for market distortion due to lending constraints which lead to a bid-ask spread for the EONIA rate.
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