IDEAS home Printed from https://ideas.repec.org/h/spr/prbchp/978-3-319-54885-2_3.html
   My bibliography  Save this book chapter

Determinants of the Spread Between POLONIA Rate and the Reference Rate: Dynamic Model Averaging Approach

In: Contemporary Trends and Challenges in Finance

Author

Listed:
  • Paweł Kliber

    (Poznan University of Economics and Business)

Abstract

In the paper we consider the factors that determine the overnight interest rates in the Polish interbank market (measured by the POLONIA rate index). In 2008 the Polish central bank (NBP) adapted the policy similar to the European Central Bank (ECB) and since then it has been trying to place the POLONIA rate around the NBP reference rate, mainly by influencing the liquidity conditions through open market operations. We try to answer the question how effective this control was. We identify a set of factors that determine overnight rates, namely: liquidity, expectations, confidence in the banking sector and central bank operations. We analyze to what degree each of these factor has been influencing the POLONIA rate in the period from 2006 to 2016. To this end we have used a non-standard econometric method, namely dynamic model averaging, which allows to identify the set of variables that provide the best description of the explanatory variable. The results reveal that before the outbreak of financial crisis in 2008 the spread between POLONIA rate and reference rate could be explained mainly by liquidity conditions. After the crisis had begun, the importance of liquidity factor decreased and the expectations played a more important role in determining the spread. The liquidity situation has regained its importance in determining the spread since the beginning of 2012, after the central bank had undertook appropriate measures to normalize the situation on the interbank market.

Suggested Citation

  • Paweł Kliber, 2017. "Determinants of the Spread Between POLONIA Rate and the Reference Rate: Dynamic Model Averaging Approach," Springer Proceedings in Business and Economics, in: Krzysztof Jajuga & Lucjan T. Orlowski & Karsten Staehr (ed.), Contemporary Trends and Challenges in Finance, pages 25-33, Springer.
    • Handle: RePEc:spr:prbchp:978-3-319-54885-2_3
    DOI: 10.1007/978-3-319-54885-2_3
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:prbchp:978-3-319-54885-2_3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.