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The Liquidity and Liquidity Distribution Effects in Emerging Markets: The Case of Jordan
Author:
Mr. Jerome Vandenbussche
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,
Mr. Stanley B Watt
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Szabolcs Blazsek null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2009: Issue 228
Language:
English
Publication Date:
01 Oct 2009
DOI:
https://doi.org/10.5089/9781451873757.001
ISBN:
9781451873757
ISSN:
1018-5941
Pages:
25
Keywords:
WP; liquidity effect; excess reserves; overnight rate
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund