The Liquidity and Liquidity Distribution Effects in Emerging Markets: The Case of Jordan

Author/Editor: Vandenbussche, Jérôme ; Blazsek, Szabolcs ; Watt, Stanley
Publication Date: October 01, 2009
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Summary: This paper analyzes the determinants of daily changes in Jordan's interbank market overnight rate. It not only quantifies the classic liquidity effect, but also uncovers a liquidity distribution effect on both sides of the market, and shows that their magnitude is a decreasing and convex function of the level of excess reserves. It finds that the volatility of rate changes depends much more on the reserve surplus accumulated within a maintenance period than on the level of excess reserves. As Carpenter and Demiralp (2006), it uses the series of the central bank's daily forecast errors to identify the liquidity effect.
Series: Working Paper No. 09/228
Subject(s): Banking systems | Central banks | Demand for money | Excess liquidity | Jordan | Liquidity management | Monetary operations | Monetary policy | Money markets | Money supply | Reserve requirements

Author's Keyword(s): interbank market | liquidity effect | liquidity distribution | monetary operations
Publication Date: October 01, 2009
Format: Paper
Stock No: WPIEA2009228 Pages: 25
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