What Drives the POLONIA Spread in Poland?

 
Author/Editor: Lu, Yinqiu
 
Publication Date: August 01, 2012
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
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. In this regard, this paper analyzes the behavior of the POLONIA spread and explore several potential factors that could influence the spread. An empirical analysis confirms that the negative POLONIA spread is related to a few factors, which include the existence of the structural liquidity in the banking system; bank’s 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.
 
Series: Working Paper No. 12/215
Subject(s): Banking systems | Central bank policy | Interest rate policy | Interest rates | Liquidity | Monetary policy | Poland

Author's Keyword(s): Poland | POLONIA | monetary policy | interbank market | and GARCH
 
English
Publication Date: August 01, 2012
Format: Paper
Stock No: WPIEA2012215 Pages: 18
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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