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The Cash Market in Australia

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  • Bob Rankin

    (Reserve Bank of Australia)

Abstract

The cash market is the market for overnight loans between financial institutions. This market is central to the operation of Australia’s financial system: it is there that banks seek to borrow or lend in response to short-term fluctuations in their liquidity, and where the Reserve Bank conducts the domestic market operations through which it controls monetary conditions and implements monetary policy changes. This paper outlines a model of the cash market in Australia, which incorporates recent changes in the operating procedures followed by the Reserve Bank. The paper shows how the dynamics of the cash market depend on the presence of both same-day and next-day settlement in the cash market, and how the various interest rates on overnight loans (“cash rates”) are determined.

Suggested Citation

  • Bob Rankin, 1992. "The Cash Market in Australia," RBA Research Discussion Papers rdp9214, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp9214
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    File URL: https://www.rba.gov.au/publications/rdp/1992/pdf/rdp9214.pdf
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    References listed on IDEAS

    as
    1. Dotsey, Michael, 1991. "Open Market Operations in Australia: A U.S. Perspective," The Economic Record, The Economic Society of Australia, vol. 67(198), pages 243-256, September.
    2. Michael Dotsey, 1991. "Open Market Operations in Australia: A US Perspective," The Economic Record, The Economic Society of Australia, vol. 67(3), pages 243-256, September.
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    Cited by:

    1. Jenny Diggle & Robert Brooks, 2007. "The target cash rate and its impact on investment asset returns in Australia," Applied Financial Economics, Taylor & Francis Journals, vol. 17(8), pages 615-633.
    2. Peter J. Stemp, 1996. "The Role of Monetary Policy in Australia: A Minimalist Approach," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 29(1), pages 10-28, January.
    3. Carmichael, Jeffrey & Harper, Ian R., 1995. "Implementing monetary policy in a deregulated financial system: A study of the Australian official short-term money market," Pacific-Basin Finance Journal, Elsevier, vol. 3(4), pages 409-428, December.
    4. Andrea Brischetto & Graham Voss, 1999. "A Structural Vector Autoregression Model of Monetary Policy in Australia," RBA Research Discussion Papers rdp1999-11, Reserve Bank of Australia.
    5. Philip Lowe, 1995. "The Link between the Cash Rate and Market Interest Rates," RBA Research Discussion Papers rdp9504, Reserve Bank of Australia.
    6. Ric Battellino & John Broadbent & Philip Lowe, 1997. "The Implementation of Monetary Policy in Australia," RBA Research Discussion Papers rdp9703, Reserve Bank of Australia.
    7. Michael Gordon, 2003. "Estimates of time-varying term premia for New Zealand and Australia," Reserve Bank of New Zealand Discussion Paper Series DP2003/06, Reserve Bank of New Zealand.

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    2. Carmichael, Jeffrey & Harper, Ian R., 1995. "Implementing monetary policy in a deregulated financial system: A study of the Australian official short-term money market," Pacific-Basin Finance Journal, Elsevier, vol. 3(4), pages 409-428, December.

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