The Liquidity and Liquidity Distribution Effects in Emerging Markets: The Case of Jordan

By Jerome Vandenbussche, Stanley B Watt, Szabolcs Blazsek

October 1, 2009

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Jerome Vandenbussche, Stanley B Watt, and Szabolcs Blazsek. The Liquidity and Liquidity Distribution Effects in Emerging Markets: The Case of Jordan, (USA: International Monetary Fund, 2009) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper analyzes the determinants of daily changes in Jordan's interbank market overnight rate. It not only quantifies the classic liquidity effect, but also uncovers a liquidity distribution effect on both sides of the market, and shows that their magnitude is a decreasing and convex function of the level of excess reserves. It finds that the volatility of rate changes depends much more on the reserve surplus accumulated within a maintenance period than on the level of excess reserves. As Carpenter and Demiralp (2006), it uses the series of the central bank's daily forecast errors to identify the liquidity effect.

Subject: Banking, Commercial banks, Excess liquidity, Liquidity, Open market operations

Keywords: Excess reserves, Liquidity effect, Overnight rate, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2009/228
Stock No:

WPIEA2009228
ISBN:

9781451873757
ISSN:

1018-5941

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