IDEAS home Printed from
   My bibliography  Save this paper

The Interbank Money Market in Hungary


  • Áron Gereben

    () (Magyar Nemzeti Bank)


Between September 1998 and Spring 1999 the liquidity of the Hungarian inter-bank money market and the corresponding interest rates for overnight funds showed significantly larger fluctuations relative to the previous periods. This study aims to analyse the causes behind the imbalances experienced during this period, and also to draw some lessons for monetary policy and operations. Fluctuations in overnight interest rates are largely irrelevant for monetary policy unless they spill over to longer maturities as well. This usually does not happen, however, as our econometric results show, in the period considered fluctuations in liquidity had a considerable impact on the 3-month inter-bank interest rate. The hectic fluctuations in liquidity were partly due to the Russian crisis and to the changes implemented in the MNB's set of monetary instruments. However, deficiencies in the commercial banks' liquidity management also contributed to the market turbulence. The analysis of market data revealed several occasions where market players behaved irrationally, and such behaviour resulted in long-lasting periods of disequilibrium on the money market. Reducing the maturity of the MNB's key policy instrument from one month to two weeks alleviated the fluctuations in liquidity; however, it could not resolve the problems arising from the inherent inefficiency of the inter-bank money market.

Suggested Citation

  • Áron Gereben, 1999. "The Interbank Money Market in Hungary," MNB Occasional Papers 1999/7, Magyar Nemzeti Bank (Central Bank of Hungary).
  • Handle: RePEc:mnb:opaper:1999/7

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    monetary instruments; operational framework; averaging; overnight interest rates.;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy


    Access and download statistics


    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:mnb:opaper:1999/7. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lorant Kaszab). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.