The day-to-day interbank market, volatility, and central bank intervention in a developing economy

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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