What Explains Call Money Rate Spread in India?

Sunil Kumar, Anand Prakash and Krishna M. Kushawaha

Working Papers from eSocialSciences

Abstract: The study focuses on various drivers of overnight inter-bank rate spread under the new liquidity management framework during July 2013 to December 2016. Applying OLS with Newey-West estimator and various GARCH models to daily data, the study finds that liquidity conditions, viz., deficit, distribution and uncertainty impact the call money rate spread adversely. A moderation in the impact of liquidity uncertainty has, however, been noticed after the introduction of fine-tuning liquidity management operations in September 2014. Other factors, viz., the quarter-end phenomenon and structural changes in the liquidity management framework have also been found impacting the call money rate spread.

Keywords: Monetary Policy; Call Money Spread; Policy Rate; Liquidity; Market Structure; liquidity management operations; structural changes; liquidity management (search for similar items in EconPapers)
Date: 2017-08
Note: Institutional Papers
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