Money market operations and short-term interest rate volatility in the United Kingdom

Wetherilt, Anne

doi:10.1080/0960310022000020898

Cited by 12 publications

(9 citation statements)

References 18 publications

(24 reference statements)

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…We follow the procedure described by Tsay (2010) and (Doman and Doman 2004) and first determine the linear dependencies in the model (1).…”

Section: Discussionmentioning

confidence: 99%

POLONIA dynamics during the years 2006–2012 and the effectiveness of the monetary Policy of the National Bank of Poland

Kliber

Płuciennik

et al. 2015

Empirica

View full text Add to dashboard Cite

In the study we investigate the effectiveness of the National Bank of Poland in counteracting the negative results of the financial crisis in the Polish interbank market. The situation was exceptional in a sense, that during the period of the financial crisis the Polish interbank market experienced liquidity surplus, and the main problem of the central bank was to regain confidence among commercial banks and stimulate interbank transactions. We concentrate on the spread between the rate of overnight interbank loans and the reference rate and based upon its dynamics we assess the monetary policy of the Polish central bank. Using econometric techniques we study how the central bank influenced the spread, when its control over it weakened and when was it strengthened. The study is supported by the results of the survey directed to the headquarters of commercial banks. We conclude that the ability of the central bank to control overnight rate wasThe views in this paper should be regarded as those of the author, and do not necessarily reflect those of the National Bank of Poland. temporarily lost during the first phases of the financial crisis, but gradually regained after implementation of the confidence pact.The aim of the research was to assess the ability of the Polish central bank to control the rate of overnight loans in the Polish interbank market and conduct its monetary policy during the confidence crisis, as well as facing the liquidity surplus. The Polish interbank market is special in a sense that liquidity surplus has been present there even since 1994 (National Bank of Poland 2009). However, together with the outbreak of the financial crisis, the confidence in the Polish interbank market declined drastically. Commercial banks preferred to accumulate liquidity surplus and performed almost no interbank transactions of maturity longer than 7 days. Banks preferred to keep their surplus on their current accounts with the central bank or in the form of deposit facility, and they significantly limited participation in the 7-day open market operations conducted by the National Bank of Poland (NBP) (National Bank of Poland 2009). The latter resulted in the so called underbidding (i.e. the situation during the tenders for the NBP bills, when the banks' total bid is lower than the supply offered by the central bank). As a consequence, the effectiveness of the central bank in stabilization of the market rates, what is one of the main goals of the monetary policy, diminished significantly.Our goal was to assess the effectiveness of the monetary policy of the Polish central bank, using econometric methods, as well as with respect to the results of the survey, sent to the head-quarters of the Polish commercial banks. The problem of assessing the effectiveness of the stabilization policy of central banks using econometric methods is also rather new in literature. Panigirtzoglou et al. (2000) studied the effectiveness of controlling the interbank rates through the key interest rates of the central banks of Grea...

show abstract

“…We follow the procedure described by Tsay (2010) and (Doman and Doman 2004) and first determine the linear dependencies in the model (1).…”

Section: Discussionmentioning

confidence: 99%

POLONIA dynamics during the years 2006–2012 and the effectiveness of the monetary Policy of the National Bank of Poland

Kliber

Płuciennik

et al. 2015

Empirica

View full text Add to dashboard Cite

show abstract

“…MMV can occur because of different factors and uncertainties, which can impact on interest rates over time as monetary policy adjusts. These are then influenced by actions of the central bank, depending on the central bank's independent power and monetary authority's ability to adjust the interest rates and achieve its targets (Wetherilt, 2003). Therefore, actions by the central bank make it possible to stabilise the variability of interest rates, giving the central bank a role to play.…”

Section: Theoretical and Empirical Literaturementioning

confidence: 99%

South African Market Volatility, Asymmetry and Retail Interest Rates Pass‐through

Fadiran

Ezeoha

2012

South African J Economics

View full text Add to dashboard Cite

The purpose of this paper is to examine the interest rate transmission mechanism for South Africa as an emerging economy in a pre‐repo and repo system. It explains how the money market rate is transmitted to the retail interest rates both in the long run and short run, and tests the symmetric and asymmetric interest rate pass‐through using the error‐correction model (ECM) and the adjusted ECM‐exponential generalised autoregressive conditional heteroscedasticity (ECM‐EGARCH) (1,1)‐M methodology. This permitted the examination of the impact of interest rate volatility, along with the leverage effect. An incomplete pass‐through is found in the short run. From the entire sample period, a symmetric adjustment is found in the deposit rate, which had upward rigidity adjustment, while an asymmetric adjustment is found in the lending rate, with a downward rigidity adjustment. All the adjustments supported the collusive pricing arrangements. According to the conditional variance estimation of the ECM‐EGARCH (1,1), negative volatility impact and leverage effect are present and influential only in the symmetric deposit interest rate adjustment process in South Africa.

show abstract

“…Compared with the results obtained for the U.S. the low persistence of UK policy spreads during the first sub-sample is more puzzling. It seems that daily interventions joint with a rather clear statement concerning the intended interest rate level had ensured the BoE's control of the overnight rate, see Wetherilt (2003). While overnight rate volatility was at a non-acceptable high level, the persistence of overnight rate fluctuations around the BoE's interest rate target was only small.…”

Section: Resultsmentioning

confidence: 99%

Monetary policy implementation and overnight rate persistence

Nautz

Scheithauer

2011

Journal of International Money and Finance

View full text Add to dashboard Cite

Overnight money market rates are the predominant operational target of monetary policy. As a consequence, central banks have redesigned the implementation of monetary policy to keep the deviations of the overnight rate from the key policy rate small and short-lived. This paper uses fractional integration techniques to explore how the operational framework of four major central banks affects the persistence of overnight rates. Our results suggest that a well-communicated and transparent interest rate target of the central bank is a particularly important condition for a low degree of overnight rate persistence.

show abstract

Money market operations and short-term interest rate volatility in the United Kingdom

Cited by 12 publications

References 18 publications

POLONIA dynamics during the years 2006–2012 and the effectiveness of the monetary Policy of the National Bank of Poland

POLONIA dynamics during the years 2006–2012 and the effectiveness of the monetary Policy of the National Bank of Poland

South African Market Volatility, Asymmetry and Retail Interest Rates Pass‐through

Monetary policy implementation and overnight rate persistence

Contact Info

Product

Resources

About