Sanchez-Fung, Jose R. (2008) The day-to-day interbank market, volatility, and central bank intervention in a developing economy. (Discussion Paper) Kingston upon Thames, U.K. : Faculty of Arts & Social Sciences, Kingston University. 49 p. (Economics Discussion Paper)
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Abstract
This paper investigates banking system instability vis-à-vis the day-to-day interbank market and monetary policy effectiveness in the Dominican Republic. The analysis reveals a negative relationship among excess banking system reserves and the interbank interest rate, and shows that in crisis 'news' affect the interbank rate's volatility asymmetrically and non-linearly. The paper also finds that the 2002-3003 banking crisis and the subsequent central bank intervention as a lender of last resort weakened monetary policy's transmission mechanism. These events undermined the ensuing stabilization effort, stressing the pervasive short-run trade-off between preserving macroeconomic stability and safeguarding financial stability, and the pitfalls of monetary policymaking in a highly volatility setting.
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Additional Information: | Economics Discussion Paper, 2008/2 |
| Physical Location: | This book is held in stock at Kingston University Library. |
| Uncontrolled Keywords: | interbank market, financial stability, monetary policy, IMF stabilization programme, Dominican Republic |
| Research Area: | Economics and econometrics |
| Faculty, School or Research Centre: | Faculty of Arts and Social Sciences > School of Economics (until November 2012) |
| Depositing User: | Susan Miles |
| Date Deposited: | 22 Oct 2008 |
| Last Modified: | 16 Jul 2012 21:48 |
| URI: | http://eprints.kingston.ac.uk/id/eprint/3478 |
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