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Liquidity management operations at the National Bank of Hungary

Author

Listed:
  • Judit Antal

    (Magyar Nemzeti Bank)

  • Gyula Barabás

    (Magyar Nemzeti Bank)

  • Tamás Czeti

    (Magyar Nemzeti Bank)

  • Klára Major

    (Magyar Nemzeti Bank)

Abstract

Central banks’ liquidity management plays a crucial role in the implementation of monetary policy. In most countries central banks influence short term interest rates through determining the equilibrium conditions of supply and demand in the market for bank reserves (liquidity). This article describes the liquidity management practice of the National Bank of Hungary in the period of 1998-2001. This period is characterized by two particular circumstances. First, there is a substantial liquidity surplus, therefore the Bank influences market interest rates using the liabilities side instruments of its balance sheet. Second, as a result of the narrow-band exchange rate regime and the fact that the Treasury Account is held with the Bank, the amount of liquidity is highly volatile and hard to forecast. The article explains how the Bank forecasts liquidity and the movements of overnight interest rate in these circumstances, and it describes the development of monetary policy instruments applied by the bank.

Suggested Citation

  • Judit Antal & Gyula Barabás & Tamás Czeti & Klára Major, 2001. "Liquidity management operations at the National Bank of Hungary," MNB Occasional Papers 2001/9, Magyar Nemzeti Bank (Central Bank of Hungary).
    • Handle: RePEc:mnb:opaper:2001/9
    as

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    File URL: http://www.mnb.hu/letoltes/op2001-9.pdf
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    Citations

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    Cited by:

    1. Suman Neupane, 2011. "Examining Volatility of Interbank Rate in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 23(1), pages 37-53, April.
    2. Pulay, Gyula & Máté, János & Németh, Ildikó & Zelei, Andrásné, 2013. "Budgetary Risks of Monetary Policy with Special Regard to the Debt Rule," Public Finance Quarterly, Corvinus University of Budapest, vol. 58(1), pages 11-34.
    3. Suman Neupane, 2011. "Examining Volatility of Interbank Rate in Nepal," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 23(1), pages 37-53, April.

    More about this item

    Keywords

    monetary policy instruments; central bank liquidity management; interbank markets.;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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