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Daily interbank rate determination and volatility in a banking crisis

Author

Listed:
  • Sanchez-Fung, Jose R.

    (NUBS University of Nottingham)

Abstract

The paper studies daily interbank rate determination and volatility in the Dominican Republic during a major banking crisis. The investigation uses a novel, automatic, general-to-specific technology (PcGets) to reduce a baseline (mean) specification linking interbank rates and aggregate banking system excess reserves. This specification is subsequently embedded in a GARCH model. Recursive coefficient analysis reveals that in times of financial stability positive or negative shocks have similar effects. In contrast, during banking crisis negative impacts (e.g. a decrease in excess reserves) generate larger volatility of interbank rates than positive ones.

Suggested Citation

  • Sanchez-Fung, Jose R., 2004. "Daily interbank rate determination and volatility in a banking crisis," Economics Discussion Papers 2004-2, School of Economics, Kingston University London.
    • Handle: RePEc:ris:kngedp:2004_002
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    File URL: http://eprints.kingston.ac.uk/6653/1/Sanchez-Fung-J-6653.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    interbank interest rate; aggregate excess reserves; banking crisis; PcGets; GARCH; Dominican Republic.;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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