What Explains Call Money Rate Spread in India?

RBI researchers – Sunil Kumar, Anand Prakash and Krishna M Kushawaha – look at the factors that explain call spread (spread = call rate – policy rate):

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

The findings pretty much fit with understanding of call market players as well..

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: