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The Impact of Liquidity Requirements on Central Bank Policies in Interbank Market of Iran (in Persian)

Author

Listed:
  • Shahchera, Mahshid

    (Iran)

  • Taheri, Mandana

    (Iran)

Abstract

The interbank rate has a great impact on the bankchr('39')s economic activities that it is one of the important instrument for central bank policy. Banks to back up their funds or liquidity demand participate in the interbank market. These change their needed or surplus liquidity based on interbank market conditions. According to this, liquidity requirements can change the central bankschr('39') monetary policy and it as a policy instrument along with central bank policies in the interbank market can influence the bankschr('39') behavioral how to provide or allocate liquidity in this market. This paper focuses on the liquidity requirement of Basel III and surveys the impact of the requirement on central bank policies in the interbank market. We link the structure of the balance sheet of banks and central bank policy. The results show that the liquidity requirement of Basel III (liquidity coverage ratio: LCR) is an appropriate alternative to central bank policy. The ratio of liquidity coverage ratio has a positive and significant relationship with the interbank market rate and the central bank can monitor the interest rate in the interbank through a liquidity coverage ratio.

Suggested Citation

  • Shahchera, Mahshid & Taheri, Mandana, 2019. "The Impact of Liquidity Requirements on Central Bank Policies in Interbank Market of Iran (in Persian)," Journal of Monetary and Banking Research (فصلنامه پژوهش‌های پولی-بانکی), Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 12(39), pages 48-23, May.
    • Handle: RePEc:mbr:jmbres:v:12:y:2019:i:39:p:48-23
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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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