Daily interbank rate determination and volatility in a banking crisis

Jose R. Sanchez-Fung ()
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Jose R. Sanchez-Fung: NUBS University of Nottingham

No 2004-2, Economics Discussion Papers from School of Economics, Kingston University London

Abstract: The paper studies daily interbank rate determination and volatility in the Dominican Republic during a major banking crisis. The investigation uses a novel, automatic, general-to-specific technology (PcGets) to reduce a baseline (mean) specification linking interbank rates and aggregate banking system excess reserves. This specification is subsequently embedded in a GARCH model. Recursive coefficient analysis reveals that in times of financial stability positive or negative shocks have similar effects. In contrast, during banking crisis negative impacts (e.g. a decrease in excess reserves) generate larger volatility of interbank rates than positive ones.

Keywords: interbank interest rate; aggregate excess reserves; banking crisis; PcGets; GARCH; Dominican Republic. (search for similar items in EconPapers)
JEL-codes: C51 E43 G21 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2004-03-01
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Persistent link: https://EconPapers.repec.org/RePEc:ris:kngedp:2004_002

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