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This paper discusses the challenging question of whether central banks should use treasury bills or central bank bills for draining excess liquidity in the banking system. While recognizing that there are practical reasons for using central bank bills, the paper argues that treasury bills are the first best option especially because positive externalities for the financial sector and the rest of the economy. However, the main considerations in the choice should be: (i) operational independence for the central bank; (ii) market development; and (iii) the strengthening of the transmission of monetary policy impulses.

Liquidity (Economics) --- Treasury bills --- Banks and banking, Central --- Banker's banks --- Banks, Central --- Central banking --- Central banks --- Banks and banking --- Bills, Treasury --- Bills and notes --- T-bills --- Government securities --- Assets, Frozen --- Frozen assets --- Finance --- Econometric models. --- Banks and Banking --- Investments: General --- Public Finance --- Debt --- Debt Management --- Sovereign Debt --- General Equilibrium and Disequilibrium: Financial Markets --- Monetary Policy --- Fiscal and Monetary Policy in Development --- Interest Rates: Determination, Term Structure, and Effects --- Wages, Compensation, and Labor Costs: Public Policy --- General Financial Markets: General (includes Measurement and Data) --- Central Banks and Their Policies --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Investment & securities --- Banking --- Public finance & taxation --- Central bank bills --- Treasury bills and bonds --- Securities --- Financial institutions --- Government debt management --- Public financial management (PFM) --- Financial instruments --- Debts, Public --- Chile