The Liquidity and Liquidity Distribution Effects in Emerging Markets
AbstractThis 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.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 09/228.
Date of creation: 01 Oct 2009
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