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Interbank Market Structure and Accurate Estimation of an Aggregate Liquidity Shock

Author

Listed:
  • Isakov, A.

    (NRU HSE, Moscow, Russia
    Bank of Russia, Moscow, Russia)

Abstract

It's customary among money market analysts to blame interest rate deviations from the Bank of Russia's target band on the market structure imperfections or segmentation. We isolate one form of such market imperfection and provide an illustration of its potential impact on central bank's open market operations efficiency in the current monetary policy framework. We then hypothesize that naive (market) structure-agnostic liquidity gap aggregation will lead to market demand underestimation in some conditions and provide an empirical backing for it.

Suggested Citation

  • Isakov, A., 2013. "Interbank Market Structure and Accurate Estimation of an Aggregate Liquidity Shock," Journal of the New Economic Association, New Economic Association, vol. 19(3), pages 52-64.
  • Handle: RePEc:nea:journl:y:2013:i:19:p:52-64
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    References listed on IDEAS

    as
    1. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
    2. Rochet, Jean-Charles & Tirole, Jean, 1996. "Interbank Lending and Systemic Risk," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 733-762, November.
    3. Castiglionesi, F. & Navarro, N., 2007. "Optimal Fragile Financial Networks," Discussion Paper 2007-100, Tilburg University, Center for Economic Research.
    4. Wong, Jian Cheng & Lian, Heng & Cheong, Siew Ann, 2009. "Detecting macroeconomic phases in the Dow Jones Industrial Average time series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(21), pages 4635-4645.
    5. Bryant, John, 1980. "A model of reserves, bank runs, and deposit insurance," Journal of Banking & Finance, Elsevier, vol. 4(4), pages 335-344, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    money market; monetary policy; market segmentation; open market operations;

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • C87 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Econometric Software
    • G19 - Financial Economics - - General Financial Markets - - - Other

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