Monetary Policy Implementation and Liquidity Management of the Czech Banking System
Karel Brůna ()
European Financial and Accounting Journal, 2010, vol. 2010, issue 3, 15-41
Implementation of monetary policy assumes that monetary policy instruments stabilize O/N interest rates to the proximity of main policy rate to archive monetary targets. The function of stabilizing mechanism is based on simple rule that the volume of liquidity in the banking system is held in line with the demand of banks for reserves. In this paper main factors of banking system liquidity are analyzed in the context of bank's imperfect intertemporal substitution of reserves and with respect to predictibility of O/N interest rates volatility. Analysis of O/N PRIBOR and CZEONIA reference interest rates prove Czech National Bank's ability to stabilise O/N interest rates disregard overall excess liquidity in the banking system. It also identified structural changes acting in the money market like reduced instability of demand for reserve and decreased volatility of O/N interest rates due to introduction of credit facility or increased volatility of the spread between O/N interest rates and repo rate due to reduction of frequency of repo tenders. Rapid increase in the volatility of differences between OMO target and bank's supply of excess reserves is also resulting in the weakening of a direct relationship between O/N PRIBOR dynamics and repo tenders.
Keywords: Interest rates; Liquidity management; Monetary policy implementation (search for similar items in EconPapers)
JEL-codes: E43 G12 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
free of charge
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:prg:jnlefa:v:2010:y:2010:i:3:id:53:p:15-41
Ordering information: This journal article can be ordered from
European Financial and Accounting Journal, University of Economics, Prague, nám. W. Churchilla 4, 130 67 Prague 3, Czech Republic
Access Statistics for this article
European Financial and Accounting Journal is currently edited by Efaj Journal
More articles in European Financial and Accounting Journal from University of Economics, Prague Contact information at EDIRC.
Bibliographic data for series maintained by Stanislav Vojir ().