The Liquidity and Liquidity Distribution Effects in Emerging Markets: The Case of Jordan

26 Pages Posted: 26 Oct 2009

See all articles by Jerome Vandenbussche

Jerome Vandenbussche

International Monetary Fund (IMF)

Szabolcs Blazsek

affiliation not provided to SSRN

Stanley Watt

affiliation not provided to SSRN

Date Written: October 2009

Abstract

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.

Keywords: Banking systems, Central banks, Demand for money, Excess liquidity, Jordan, Liquidity management, Monetary operations, Monetary policy, Money markets, Money supply, Reserve requirements

Suggested Citation

Vandenbussche, Jerome and Blazsek, Szabolcs and Watt, Stanley, The Liquidity and Liquidity Distribution Effects in Emerging Markets: The Case of Jordan (October 2009). IMF Working Papers, Vol. , pp. 1-25, 2009. Available at SSRN: https://ssrn.com/abstract=1493545

Jerome Vandenbussche (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Szabolcs Blazsek

affiliation not provided to SSRN ( email )

Stanley Watt

affiliation not provided to SSRN ( email )

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