In this chapter, we change the average rate model presented in the previous chapter by assuming that there are overlapping maturities of central bank credits. We will show that the overlapping maturities imply that central bank borrowing will deviate even more from the central bank’s benchmark amount and that even more required reserves will be postponed if the repo rate is cut. If the repo rate is raised, the overlapping maturities
imply that central bank borrowing deviates even more from the central bank’s benchmark amount and that even more required reserves are frontloaded. Furthermore, we will show that banks are affected differently by a monetary policy impulse if the repo rate is cut and that they
be affected differently if the repo rate is raised. Moreover, we will demonstrate that the overlapping maturities may prevent a smoothing of the interbank market rate.