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International Monetary Fund

signals to banks and discourage interbank market participation. Interbank markets are in turn important to provide liquidity price-discovery mechanisms. At the same time, high reliance on central banks for liquidity provision can discourage banks from managing their liquidity soundly and make central banks take on more credit risk than necessary. standing facilities are also more passive instruments in nature than OMOs since they are activated at the initiative of banks within the parameters set by central banks. 25. Central banks in the region have made periodic use