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)

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.

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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:	Research Areas > Economics and econometrics
Faculty, School or Research Centre:	Faculty of Arts and Social Sciences (until 2017) > School of Economics (until November 2012)
Series Name:	Economics Discussion Paper
Date Deposited:	22 Oct 2008
Last Modified:	06 Oct 2020 13:23
URI:	https://eprints.kingston.ac.uk/id/eprint/3478

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