What Drives the POLONIA Spread in Poland?
Since the start of the 2008 - 09 financial crisis, the Polish Overnight Index Average (POLONIA) has persistently been below the policy rate, suggesting a limited influence of the NBPâ€™s open market operations on the short-term interbank rate. In this regard, this paper analyzes the behavior of the POLONIA spread and explore several potential factors that could influence the spread. An empirical analysis confirms that the negative POLONIA spread is related to a few factors, which include the existence of the structural liquidity in the banking system; bankâ€™s unwillingness to lock up liquidity in the NBP bills; the frontloading of banksâ€™ fulfillment of the reserve requirements; and external market sentiment. The analysis also shows the effectiveness of the NBPâ€™s responses to the financial crisis and structural liquidity surplus.
|Date of creation:||01 Aug 2012|
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- International Monetary Fund, 2009. "What Drives Chinaâ€™s Interbank Market?," IMF Working Papers 09/189, International Monetary Fund.
- Bartolini, Leonardo & Prati, Alessandro, 2006.
"Cross-country differences in monetary policy execution and money market rates' volatility,"
European Economic Review,
Elsevier, vol. 50(2), pages 349-376, February.
- Leonardo Bartolini & Alessandro Prati, 2003. "Cross-country differences in monetary policy execution and money market rates' volatility," Staff Reports 175, Federal Reserve Bank of New York.
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