{
  "title": "What Drives the POLONIA Spread in Poland?",
  "publication": "IMF Working Papers, August 1, 2012",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/what-drives-the-polonia-spread-in-poland-26220",
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  "summary": "Since the start of the 2008 - 09 financial crisis, the Polish Overnight Index Average (POLONIA) has persistently been below the policy rate, suggesting a limited influence of the NBP’s open market operations on the short-term interbank rate.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Since the start of the 2008 - 09 financial crisis, the Polish Overnight Index Average (POLONIA) has persistently been below the policy rate, suggesting a limited influence of the NBP’s open market operations on the short-term interbank rate.\n- The paper analyzes the behavior of the POLONIA spread and explores several potential factors that could influence the spread.\n- Empirical analysis confirms that the negative POLONIA spread is related to a few factors: the existence of structural liquidity in the banking system; banks’ unwillingness to lock up liquidity in the NBP bills; the frontloading of banks’ fulfillment of the reserve requirements; and external market sentiment.\n- The analysis also shows the effectiveness of the NBP’s responses to the financial crisis and structural liquidity surplus."
    },
    {
      "heading": "Empirical Determinants of the POLONIA Spread",
      "content": "- Structural liquidity in the banking system relates to a persistent negative POLONIA spread.\n- Bank behavior factors:\n  - Unwillingness to lock up liquidity in the NBP bills.\n  - Frontloading of banks’ fulfillment of the reserve requirements.\n- External factors:\n  - External market sentiment influences the POLONIA spread.\n- Methodology note:\n  - The study employs empirical analysis to link the negative POLONIA spread to the factors listed above."
    },
    {
      "heading": "Policy Analysis and Implications",
      "content": "- The negative POLONIA spread indicates a limited transmission of NBP’s open market operations to the short-term interbank rate.\n- NBP responses to the financial crisis and to the structural liquidity surplus were found to be effective according to the analysis.\n- Implicit policy considerations based on findings:\n  - Addressing structural liquidity surplus may be necessary to restore closer alignment between POLONIA and the policy rate.\n  - Consideration of banks’ preferences regarding NBP bills when designing liquidity absorption instruments.\n  - Monitoring and managing the timing of reserve requirement fulfillment to reduce frontloading effects.\n  - Surveillance of external market sentiment as a factor affecting short-term rates.\n\n---\n\n Content in this bundle\n\n- What Drives the POLONIA Spread in Poland?; by Yinqiu Lu; IMF Working Paper 12/215; August 1, 2012\n  - What Drives the POLONIA Spread in Poland?; by Yinqiu Lu; IMF Working Paper 12/215; August 1, 2012 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - What Drives the POLONIA Spread in Poland?; by Yinqiu Lu; IMF Working Paper 12/215; August 1, 2012 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/what-drives-the-polonia-spread-in-poland-26220"
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    "Authors: Miss Yinqiu Lu",
    "Published: August 1, 2012",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781475505658.001",
    "Since the start of the 2008 - 09 financial crisis, the Polish Overnight Index Average (POLONIA) has persistently been below the policy rate, suggesting a limited influence of the NBP’s open market operations on the short-term interbank rate.",
    "The paper analyzes the behavior of the POLONIA spread and explores several potential factors that could influence the spread.",
    "Empirical analysis confirms that the negative POLONIA spread is related to a few factors: the existence of structural liquidity in the banking system; banks’ unwillingness to lock up liquidity in the NBP bills; the frontloading of banks’ fulfillment of the reserve requirements; and external market sentiment.",
    "The analysis also shows the effectiveness of the NBP’s responses to the financial crisis and structural liquidity surplus.",
    "Structural liquidity in the banking system relates to a persistent negative POLONIA spread.",
    "Bank behavior factors:",
    "External factors:",
    "Methodology note:",
    "The negative POLONIA spread indicates a limited transmission of NBP’s open market operations to the short-term interbank rate.",
    "NBP responses to the financial crisis and to the structural liquidity surplus were found to be effective according to the analysis.",
    "Implicit policy considerations based on findings:",
    "**What Drives the POLONIA Spread in Poland?; by Yinqiu Lu; IMF Working Paper 12/215; August 1, 2012**"
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