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Interbank Rate and the Liquidity of the Market

Luis A. Ahumada, Alvaro Garcia-Marin, Luis Opazo and Jorge Selaive ()

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: In this paper we study the dynamics of the interbank rate in Chile, with special attention to the role of liquidity provided by private depositors and by the central bank’s open market operations on a daily basis. The main aim of this paper is the use of disaggregated and high frequency data on such variables. The most relevant findings are related to the statistical and economic significance of speed of convergence, calendar effects and repos operations. The Central Bank plays a more important role injecting than draining liquidity through discretionary operations. However, there are not asymmetries in terms of the effectiveness of the discretionary injections and drainages operations depending on the liquidity market status. In terms of effect by class of bank, large- and medium-size banks are less receptive to monetary operations; by contrast small-size banks are the most responsive, which is consistent with its traditional position as a liquidity demander. Finally, private deposits do not play an important role on the dynamics of the interbank rate during the sample period.

Date: 2009-04
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:516

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