Call market is a financial market for the trading of temporary funding overs and shorts mainly among financial institutions. However, there remain some pressing issues regarding Korea's call market. The most prominent is the call-market concentration problem, which results in many other problems, such as an inactive RP market, a stagnant CP market, and making the CD rate unable to serve as an adequate benchmark for the money market rate. This problem causes government to consider the possibility of restructuring call market to be an interbank market.
This paper analyses the impact of the change of call market structure on the behavior of the call rate. It constructs the model by combining a profit maximizing behavior by commercial banks with the central bank supplying the liquidity that keeps the market rate on policy rate. The demand side of the market is based on the behavior observed in countries using averaging provision reserve requirement and channel system of standing facilities. The supply side of the market is given by the central bank open market operations, aiming for setting the call market at some target.
To investigate the behavior of the call rate, this paper calibrates the theoretical model and constructs simulation exercises in order to evaluate the impact of the change of market structure.
The main conclusions from calibration are as follows: (1) the spread of call rate compared with policy rate decreases as only banks participate the interbank market (2) the volatility of the call rate depends on the size of spread of standing facility rates compared to policy rate. The main conclusion from calibration is that the behavior of call rate depends mainly on the operating procedures of monetary policy.
콜시장의 지준시장화에 따른 콜금리 움직임 분석(An analysis of call rate behavior at interbank market)
시뮬레이션을 중심으로(A simulation study)
|Series Title; No||KIF 연구보고서 / 2010-06|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||한국금융연구원; KDI 국제정책대학원|